F3 Formulae Flashcards
Total Shareholder Return as a %
Dividend per share + capital gain /
Share price at the start of the year x 100
Share price
P/E ratio x EPS
Earnings per share
Profits distributable to ordinary shareholders (Profits after tax, interest and preference dividends) /
Number of ordinary shares
Total shareholder return as an amount
Capital gain on share price + dividends received during the year
Return on equity (shareholders funds)
Earnings / Shareholders funds
P/E Ratio
Share price / EPS
Shareholders funds as an amount if not given in question:
Ordinary shares + reserves (book value)
Gearing
Debt / Equity (shareholders funds)
or
Debt / Debt + Equity
- Look out in Q whether it states book values or market values!!
Interest cover
PBIT /
Interest
Annual compound growth rate
n √[ (Latest dividend) / (Earliest dividend) -1]
ROCE
PBIT / Capital employed
* Capital employed = shareholders funds + LTD
Dividend yield
Dividend per share /
Market price per share x 100
Convertible bonds conversion value
Conversion ratio x market price per share
Convertible bonds conversion premium
Current market value - conversion value
Value of rights (rights issue)
TERP - issue price /
N
n = no of rights required to buy one share
Yield adjusted TERP
1 / N+1 x
[(N x cum-rights price) + (issue price x (y new / y old)]
Ke - dividend growth model
Ke = D1 /
P0 + g
Estimating g using current reinvestment levels
g = return on equity x balance reinvested
CAPM formula
Ke = Rf + (Rm - Rf) x B
WACC
Keg x (Ve / Ve + Vd) + Kd(1-t) x (Vd / Vd+Ve)
Value of debt plus equity in a geared company
Vg = Vu + Tb
Vu = value of equity in an equivalent ungeared company Tb = tax shield on debt
Cost of equity of a geared company
Keg = Keu + [(Keu - Kd) x (Vd(1-t) / Ve)]
M&M adjusted WACC formula
WACC = Keu x (1 - Vdxt / Ve + Vd)
Value at risk (VaR)
confidence interval x standard deviation
- Confidence interval = comes from normal distribution table
Daily Sigma (o)
Given σ ÷ √Number of days covered
PPP theory or IRP formula
S1 = So x (1 + r var) / (1 + r base)
r var = interest rate of variable currency (1.2842 USD)
r base = interest rate of base currency (1 GBP)
Finding the real interest rate
(1 + r nominal) = (1 + r real) x (1 + inflation)
Dividend valuation method formula
D0 = d1 / (Ke - g)
P/E Method of valuation formula
Earnings of target x appropriate P/E ratio
Earnings yield method of valuation
Prospective earnings (in one year) x (1 / Ke)
Ungearing a beta (calculating an asset beta)
Beu = Beg x (Ve / Ve + Vd(1-t) + Bd x (Vd(1-t) / Ve + Vd(1-t)
