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Final

FIN 300 FINAL EXAM FORMULA SHEET.docx

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Department
Finance
Course
FIN 300
Professor
Aaron Tucker
Semester
Fall

Description
n PVIF = 1 / (1 + r) r = interest rate per period Bond value = [Annuity present value of the coupons] + [Present value of the face amount] Po = (D1+ P1) / (1+r) The Zero Growth model formula is: formula is: The Zero Growth model (constant) D1= Do (1+g) , Dt= Do (1+g)t So, for D3=Do(1+g)3 then again for P0 *1+g/(r-g) , P1 = P0(1 + g) The Non-constant Growth Model Required Return Equation for Stocks D1= D (o+g) Expected Dividend per share= Yld x Close r =required return, DY=dividend yield, and CGY=capital gains yield Dividend Yield Capital Gains Yield The P/E Derived The PEG Ratio = divide the P/E ratio by the percentage growth rate in earnings. Pt = Benchmark PE ratio * EPs t Pt = Benchmark price sales ratio * Sales per share NPV Decision Rule The NPV decision rule is: If NPV is greater than zero (NPV > 0), accept the project (otherwise reject it) PB Decision Rule The payback period decision rule is: If the payback period is 2 years or less (or some other arbitrary cut-off), accept the project. DPB Decision Rule The discounted payback period decision rule is: If the payback period is 2 years or less (or some other arbitrary cut-off), accept the project. DPB Evaluation: The AAR rule is: If the AAR is > 25% (or some other arbitrary return), accept the project AAR = Avg Net Income / Avg Book Value AAR Evaluation PI Decision Rule The PI decision rule is: If PI is > 1.0, accept the project (otherwise reject it) where, PV(Inflows) = NPV + PV(Outflows IRR Decision Rule The IRR decision rule is: If the IRR is greater than the 10% required return (or some other specified required return), accept the project. Project Cash Flows Project Cash Flow = Project Operating Cash Flow – Project additions to NWC- Project Capital Spending Projected Net Income= EBIT- Taxes Depreciation = UCC ÷ 2 × CCA rate Tax Shield (TS) OCF =
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