Equity

Question 1

What is the formula for G (Growth rate) used for GGM

Answer 1

ROE x RR
ROE x (1-DPR)

Question 2

FCFE starting from CFO

Answer 2

CFO - Capex + Net borrowing

Question 3

FCFF starting from CFO

Answer 3

CFO + I(1-t) - Capex

Question 4

FCFF starting from EBITDA

Answer 4

EBITDA (1-t) + (Depreciation x Tax rate) - Capex - Change in WC

Question 5

FCFF starting from EBIT

Answer 5

EBIT(1-T) + Depreciation - Capex - Change in WC

Question 6

FCFE using Debt ratio

Answer 6

Net income - [(Capex-Depreciation)(1-DR)] - [ΔWC(1-Dr)]

Question 7

Formula for P/B

Answer 7

(ROE - g) / (r-g)

Question 8

Formula for PEG

Answer 8

(P/E) / g

g - not in % terms . 8.5 instead of 0.085%

Question 9

Formula for the value of a countrys equity market

Answer 9

Vt = GDP x S x PE

Vt = Value of equity market at time t.
S = Share of corporate profit in GDP
PE = Price to earnings ratio

Question 10

Formula for the growth of a countrys equity market

Answer 10

%ΔVt = %ΔGDP x%ΔS x %ΔPE

Question 11

If actual GDP > Potential GDP

Answer 11

Inflationary enviorment
Solution: Restricitve monetary policy
Bond prices will fall as a result

Question 12

If actual GDP < Potential GDP

Answer 12

Deflationary
Solution: Expansionary monetary policy
Bond prices will rise

Question 13

Total factor of productivity TPF formula

Answer 13

TPF = Growth due to labor productivity - Growth due to capital deepening.