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2020 CFA LEVEL II > Equity > Flashcards

Equity Flashcards

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CFA flashcards
1
Q

IV analyst - price =

A

IV act - price + (IV analyst - IV actual)

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2
Q

gordan growth model

A

v=d1/(r-g)

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3
Q

Ibbotsen-chen ERP

A

(1+inflation) * (1+r growth in EPS) * (1+ PEG) -1 + yld on index -rf

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4
Q

build-up method

A

does not use betas to adjust for the exposure of a factor

=bond yield + risk premium

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5
Q

adjusted beta

A

2/3 * regression beta + 1/3 * 1

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6
Q

strength & weakness of equity models

A

capm is simply but have low explanatory power

multifactor have more explanatory power but are more complex and costly

build-up are simple and can apply to closely held companies, but they typically use historical values as estimated that may or may not be relevant to the current situation

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7
Q

GGM ERP

A

1-yr forecast div yld on market index
+ consensus LT earnings growth
-LT gov’t bond yld

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8
Q

IRR intrinsic value =

A

D1/(R-G)

R=D1/P0 +G

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9
Q

real GDP growth rate

A

labor productivity growth + labor supply growth rate

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10
Q

labor supply growth rate

A

population growth rate + increase in labor force participation rate

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11
Q

beta est for thinly traded stocks

A 
Bu = 1/ (1+D/E) * Be
Be' = (1+ 'D/E) * Bu
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12
Q

5-factor BIRR Model

A

rf
+ (sensitivity to confidence risk) * confidence rp)
+ sensitivity to business cycle risk + bc rp)
+(sensitivity to market timing risk * mkt timing rp)
-(sensitivity to time horizon * time horizon rp)
-(sensitivity to inflation risk * inf rp)

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13
Q

build-up approach r=

A

rf + ERP + Size premium + specific company premium

no beta

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14
Q

WACC

A

D/A * rd * (1-t) + E/A *re

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15
Q

net debt

A

gross debt - cash and cash equivalent/st debt

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16
Q

net int. expense

A

gross interest exp

-int. income on cash and ST debt

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17
Q

inc. ta exp

A

cash tax due + change in deferred liabilities - change in deferred asset

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18
Q

PP&E

A

depr + CAPex

net pp&e = ppe-change in (CAPEX-DEPR)

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19
Q

ROIC

A

NOT AFFECTED BY LEVERAGE
=NOPLAT /INVESTED CAPITAL
=EBI/(Operating asset - operating liablities)
=EBIT(1-t)/invested capital

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20
Q

ROCE

A

useful to compare company/countries with diff. rates
= op. profit/ capital employeed
=EBIT/(D+E)

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21
Q

int. exp

A

net debt * tax

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22
Q

Reinvestment yr report debt for same reinvestment policy

A

total debt/(op cf - reinvestment)

reinvestment= capex - expenditure on intangible

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23
Q

RI

A

NI-re*bg bv of equity

用于negative fcff, no dividend, high earnings quality, transparent reporting

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24
Q

DDM (MINORITY)

A

Vo = D1/(1+r1)+p1(1+r1)

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25
Q

ggm growth rate

A

g=(r-d)/(1+dvd yld)

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26
Q

ggm for perferred stock

A

v=D/R

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27
Q

actual value of company share PVGO

A

V=E1/r +PVGO

P/E = (1/R)+(PVGO/E1)

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28
Q

Leading p/e1

JUSTIFIED FORWARD

A

po/E1
=D1/E/(r-g)
=(1-b)/(r-g)

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29
Q

trailing p/e

JUSTIFIED TRAILING

A

P0/E0
=d0(1+g)/e0/(r-g)
=(1+b)*(1+g)
/(r-g)

30
Q

H model V

A

=D0(1+gL)/(r-gL)

+D0H(gS-gL)/(r-g)

31
Q

sustainable growth rate

A

g=b* roe

g= ni-dividend/ni * ni/sales * sales/total asset * total asset/equity

32
Q

financial leverage

A

ROE/ROA

33
Q

ROE

A

NI/Equity
=ni/asset * asset/equity
=ni/revenue * revenue/assets * asset/equity
=net profit margin * asset turnover * leverage

34
Q

when to use FCFF model

A

unstable dividend or divided policy is not reflecting controlling shareholder

35
Q

FCINv

A

=end gross ppe - beg gross ppe - proceeds from sale of lt assets
=end net ppe-beg net ppe + depr
=capEx - proceeds from sale of LT assets

36
Q

WCInc

A

change in current assets excl.cash & cash equivalents

-change in current liability excl. st debt

37
Q

CFO

A

NI+NCC-WCINC

38
Q

FCFF from NI

A 
NI 
\+DEPR
\+INT(1-t)
-FCInv
-WCInv
39
Q

FCFF from EBIT

A 
=
EBIT(1-t)
\+depr
-FCInv
-WCInv
40
Q

FCFF from ebitda

A

EBITDA(1-t)
+depr(t)
-fcinv
-wcinv

41
Q

FCFF from CFO

A

=CFO
+INT(1-t)
-fcinv

42
Q

FCFE from FCFF

A

=FCFF
-int(1-t)
+net borrowing

43
Q

FCFE from NI

A 
NI
\+depr
-fcinv
-wcinv
\+net borrowing 
− principal repayments 
\+ new debt issues
44
Q

FCFE from CFO

A

CFO
-FCInv
+net borrowing

45
Q

FCFE with target debt ratio

A

NI - (1-DR)(FC-depr)-(1-DR)*WC
=NI - (1-dr)(fcinv-depr+wcinv)

FCFE = net profit – NetFCInv – WCInv + DebtFin

46
Q

dividend payout

A

1-b

47
Q

income based

A

high growth company

48
Q

market based

A

mature company

49
Q

asset based

A

start-up

50
Q

PEG

A

p/e
/g
lower the better, implies undervalued

51
Q

Yardeni model CEY

A

CBY-(b* LTEG)+ residual

CBY=bond yld
LTEG = consensus5yr growth earnings

p/e = 1/ (CBY-b*LTEG)

52
Q

P/B

A

more stable than p/e
disadvantage: easy to influnence by accounting
misleading by diff. size of firm

= ROE(P/E)
=ROE)(1-B)(R-G)
=(ROE-g)/(r-g)

53
Q

BVPS

A

total asset - total liabilities

/share outstanding

54
Q

Justified P/B

A

P0/b0
=Roe-g
/r-g
=1+(roe-r)/(r-g)

high p/b, implies undervalued

55
Q

P/S

A

meaningful even for distressed firm
sale/rev not easy to manipulated
useful for cycical, mature start-up compnay
disadv: rev recognication can be distorted
high sale <> high profit

=(E0/S0)(1-b)/(r-g)

56
Q

Total invested capital

A

mv of cm +mv of ps + mv of debt

57
Q

SUE standardized unexpected earnings

A

epst -e(epst)/std (epst-e(epst))

58
Q

relative strength indicator

A

stock performance/performance of an equity index

59
Q

harmonic mean

A

n/(1/x)

60
Q

Residual income

A 
NI-EQUITY CHARGE
=NI-equity * re
good for non-dividend, negative fcf
,high uncertain terminal value
reliable on accounting data requires clean surplus relationship
easy to be manipulated

=ROIC - effective capital charge * bb capital
-ni-equity charge - preferred stock dividend

use book value

61
Q

EVA

A

NOPAT - (C%TC)
=EBIT(1-t)-(waccinvested capital)
invested capital = net WC + net fixed assets
=bv of LT debt + BV of equity

62
Q

MVA (market value added)

A

MV -(bv of equity and debt)

63
Q

RI Model

A

RI = Et - (r* Bt-1)
=(ROE-r)*Bt-1

v= Bo+ (ROE-R)/(r-g)*B0

64
Q

Tobin’s q

A

mv of debt & equity/replacement cost of total assets

65
Q

synegy

A

only for strategic

66
Q

guideline public company method

A

use market values of similar public traded shares adj. for diff. in growth and risk between two companies

67
Q

guideline transactions method

A

use the values from actual sales of controlling positions in either public or private companies

68
Q

prior transaction method

A

uses sales prices from actual transactions in the subject company’s shares

69
Q

DLOC

A

1- 1/(1+control premium)

70
Q

total discount

A

1-(1-DLOC)*(1-DLOM)

71
Q

FCFF from FCFE

A

=FCFE+interest expense - net borrowing
int. exp=INT*(1-t)
net borrowing=debt addition - repayment debt

72
Q

excess earnings method

A

values tangible and intangible assets separately; this method is useful for small firms and when there are intangible assets to value.

2020 CFA LEVEL II (15 decks)

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