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2020 CFA LEVEL II > Equity > Flashcards

Equity 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
ggm growth rate
g=(r-d)/(1+dvd yld)
26
ggm for perferred stock
v=D/R
27
actual value of company share PVGO
V=E1/r +PVGO P/E = (1/R)+(PVGO/E1)
28
Leading p/e1 | JUSTIFIED FORWARD
po/E1 =D1/E/(r-g) =(1-b)/(r-g)
29
trailing p/e | JUSTIFIED TRAILING
P0/E0 =d0(1+g)/e0/(r-g) =(1+b)*(1+g) /(r-g)
30
H model V
=D0(1+gL)/(r-gL) | +D0*H*(gS-gL)/(r-g)
31
sustainable growth rate
g=b* roe g= ni-dividend/ni * ni/sales * sales/total asset * total asset/equity
32
financial leverage
ROE/ROA
33
ROE
NI/Equity =ni/asset * asset/equity =ni/revenue * revenue/assets * asset/equity =net profit margin * asset turnover * leverage
34
when to use FCFF model
unstable dividend or divided policy is not reflecting controlling shareholder
35
FCINv
=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
WCInc
change in current assets excl.cash & cash equivalents | -change in current liability excl. st debt
37
CFO
NI+NCC-WCINC
38
FCFF from NI
``` NI +DEPR +INT(1-t) -FCInv -WCInv ```
39
FCFF from EBIT
``` = EBIT(1-t) +depr -FCInv -WCInv ```
40
FCFF from ebitda
EBITDA(1-t) +depr(t) -fcinv -wcinv
41
FCFF from CFO
=CFO +INT(1-t) -fcinv
42
FCFE from FCFF
=FCFF -int(1-t) +net borrowing
43
FCFE from NI
``` NI +depr -fcinv -wcinv +net borrowing − principal repayments + new debt issues ```
44
FCFE from CFO
CFO -FCInv +net borrowing
45
FCFE with target debt ratio
NI - (1-DR)(FC-depr)-(1-DR)*WC =NI - (1-dr)(fcinv-depr+wcinv) FCFE = net profit – NetFCInv – WCInv + DebtFin
46
dividend payout
1-b
47
income based
high growth company
48
market based
mature company
49
asset based
start-up
50
PEG
p/e /g lower the better, implies undervalued
51
Yardeni model CEY
CBY-(b* LTEG)+ residual CBY=bond yld LTEG = consensus5yr growth earnings p/e = 1/ (CBY-b*LTEG)
52
P/B
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
BVPS
total asset - total liabilities | /share outstanding
54
Justified P/B
P0/b0 =Roe-g /r-g =1+(roe-r)/(r-g) high p/b, implies undervalued
55
P/S
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
Total invested capital
mv of cm +mv of ps + mv of debt
57
SUE standardized unexpected earnings
epst -e(epst)/std (epst-e(epst))
58
relative strength indicator
stock performance/performance of an equity index
59
harmonic mean
n/(1/x)
60
Residual income
``` 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
EVA
NOPAT - (C%*TC) =EBIT(1-t)-(wacc*invested capital) invested capital = net WC + net fixed assets =bv of LT debt + BV of equity
62
MVA (market value added)
MV -(bv of equity and debt)
63
RI Model
RI = Et - (r* Bt-1) =(ROE-r)*Bt-1 v= Bo+ (ROE-R)/(r-g)*B0
64
Tobin's q
mv of debt & equity/replacement cost of total assets
65
synegy
only for strategic
66
guideline public company method
use market values of similar public traded shares adj. for diff. in growth and risk between two companies
67
guideline transactions method
use the values from actual sales of controlling positions in either public or private companies
68
prior transaction method
uses sales prices from actual transactions in the subject company's shares
69
DLOC
1- 1/(1+control premium)
70
total discount
1-(1-DLOC)*(1-DLOM)
71
FCFF from FCFE
=FCFE+interest expense - net borrowing int. exp=INT*(1-t) net borrowing=debt addition - repayment debt
72
excess earnings method
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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