Finance Flashcards
How is NPV calculated
[Income * (1-Tax Rate) + (Depreciation * Tax Rate) - Initial Cash Outflow]
Discount each years cash inflow to present value
What is the CAPM equation
The expected return on a stock
Rf+B[Rm-Rf]=k
What is the Gordon Dividend Discount Model
Used to calculate the price of a stock
[Div/(K-G)]
K = Expected Return. G = Growth of dividend
For years in the future, compound intial dividend by growth rate using:
Divt= Div0 x (1+G)^t
How do you calculate WACC
Multiply portion of capital stock by cost of capital. Except for debt, which receives additional tax benefits by being multiplied by (1-Tax Rate)
How do you calculate expected cash flow from a project
Income * (1-Tax Rate) + (Depreciation * Tax Rate)
What is Economic Value Added
Economic value added is the net operating profit after tax minus the opportunity cost of capital. Economic value added is the measure of a company’s financial performance.
How do you calculate the cost of preferred stock
[Dividends / (Sell Price - Flotation Cost)
Alternatively: money distributed / money received
ROI Equation
Net Income / Average Operating Assets
Abandonmnet Ratio
Number of visitors who start, but don’t complete, transactions
Working Capital formula
Current Assets - Current Liabilities
Payback Period formula
Initial Cash Flow Outlay / Annual Net Cash Flows
Effective Interest Rate formula
Interest Expense / Book Value of Note
