Formula Sheet for Final Exam

This is the proposed formula sheet.  Feel free to suggest any additions or changes.  

PV of ordinary perpetuity (first payment time 1):   PV₀ = C/r

PV of ordinary growing perpetuity:   PV₀ = C₁/(r-g)

1+R_REAL = (1+R_NOMINAL)/(1+i)

Real CF_t = (Nominal CF_t)/(1+i)^t

REVENUES

-       COSTS

-        TAX DEPRECIATION

=      EBT

-        TAX

=     NET INCOME

+     TAX DEPRECIATION

-       INCREASE IN WC

=     OPERATING CASHFLOW

-        CAPITAL INVESTMENT

=     NET CASHFLOW  

 Cash + New Equity = Investment + dividends  

    PCM

b_a = (D/V) b_d +  (E/V) b_e

b_e= b_a  + (D/E) (b_a - b_d)

            WACC = (D/V) R_d + (E/V) R_e = R_a  

 WACC = R_a

         REAL WORLD

V_L = V_U + D*T^’ – PV(COFD)

T^’ = 1 – [(1 - T_pe)(1 - T_c)]/( 1 - T_p)]

      R_e = R_a  + (D/E) (R_a - R_d) (1 - T^’)

WACC = (D/V) R_d (1 - T^’) + (E/V) R_e

  WACC = R_a *[1 – (D/V)*T^’] 

APV of project = Base case NPV + D*T^’ – PV(COFD) – Issue Costs

C =  P₀ N(d₁) - X e^-RT N(d₂) 

d₁ = { ln (P₀/X) + (R + 0.5 s ²)*T } / { s Ö T} 

d₂ = d₁ - s Ö T  

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