BEC X - Formulas Flashcards
Cost of Capital Computations:
- Cost of Debt
- Cost of P/S
- Cost of C/S
- Cost of Debt
= pretax cost of debt* x (1 - Tax Rate)
*pretax cost of debt = face amount x coupon rate
- Cost of P/S
=P/S dividends / net proceeds of P/S
- Cost of C/S
= (expected dividend/current stock price) + constant growth in dividend
What is the economic order quantity?
EOQ = squareroot of [2(annual sales)(Cost per Order)] divided by Carrying Cost per Unit
Calculating the PV of an Annuity?
Annuity PV = Cash Annuity PMT x [(1 - PV Factor)/rate of return]
**PV Factor = 1 - [1/(1+r)^t] / r
When a company is expected to pay the same dividend each period, what is the per share valuation?
Dividend / required rate of return
When the dividend will grow consistently, what is the per share valuation formula?
= expected dividend (t+1)/ (required rate of return - dividend growth rate)
What are the different price multiples and what can they be used for?
can be used to determine the current stock price.
- P/E Ratio
- PEG Ratio
- Price to Sales Return Ratio
- Price to Cash Flow Ratio
- Price to Book Ratio
What is the P/E Ratio?
=Current stock price / expected earnings in one year
What is the PEG Ratio?
it is a measure that demonstrates the effect of earnings on a company’s P/E
PEG = [Current Stock Price/ Expected earnings] / (Growth rate x 100)
Value of Equity = PEG x (Expected earnings in 1 yr) x (growth rate x 100)
What is the Price to Sales Ratio?
this multiple can also be used to determine the intrinsic value of a stock; rationale for using this method is that sales are less subject to manipulation than earnings and can be used when earnings are negative
P/S Ratio = current stock price / expected sales in one year
Value of Equity = P/S Ratio x (expected sales in one year)
What is the price to cash flow ratio?
can be used to calculate intrinsic value; can be preferred over P/E bc cash flow is more difficult to manipulate than earnings and is more stable than earnings
P/C Ratio = current stock price / cashflow expected in 1 year
Value of Equity = P/C ratio x cashflow expected in 1 year
What is the Price to Book Ratio?
can be used to determine intrinsic stock value; unlike the other ratios that focus on income statement, this focuses on balance sheet
P/B Ratio = current stock price / current book value of C/S
Value of Equity - P/B ratio x book value of C/S
What are the formulas for the following:
DM price variance
DM quantity usage variance
DM price variance = actual quantity purchased x (actual price - std price)
DM quantity usage variance = Std price x (Actual quantity used - std quantity allowed)
What are the formulas for the following:
DL rate variance
DL efficiency variance
DL rate variance = actual hours worked x (actual rate - std rate)
DL efficiency variance = std rate x (actual hours worked - std hours allowed)
What are the formulas for the following:
Var. Overhead Rate (Spending) Variance
Var. Overhead efficiency (usage) variance
Var. Overhead Rate (Spending) Variance = actual hours x (actual rate - std rate)
Var. Overhead efficiency (usage) variance = std rate x (actual hours - std hours allowed for actual production volume)
What are the formulas for the following:
Fixed Overhead Budget (Spending) Variance
Fixed Overhead Volume Variance
Fixed Overhead Budget (Spending) Variance = actual fixed overhead - budgeted fixed overhead
Fixed Overhead Volume Variance = budgeted fixed overhead - std fixed overhead cost allocated to production**
**based on Actual production x Std Rate
