Formulas to Know

Question 2

Fundamental balance sheet relationship

Answer 2

total assets = total liabilities + total equity

Question 3

Enterprise Value

Answer 3

EV = Market Cap + Total Debt - Cash

Question 4

Market Cap

Answer 4

Market Cap = Shares Outstanding * Stock Price

Question 5

Market to Book Ratio

Answer 5

M-to-B = Market Cap / Book Value of Equity

Question 6

Levered Free Cash Flow

Answer 6

EBITDA - Change NWC - Capital Expenditure - Debt

(amount of cash a company has after paying debts)

Question 7

Unlevered Free Cash Flow

Answer 7

NOPAT + D&A - Increase in NWC - Capex

(Cash before debt payments are made)

Question 8

PV of a Lump Sum

Answer 8

PV = FV / (1 + r/)^t

rate
time

Question 9

FV of a Lump Sum

Answer 9

FV = PV / (1+i)^n

Question 10

Present Value of Growing Perpetuity

Answer 10

Cash Flow at t = 1 / (Discount Rate - Growth Rate)

Question 11

(PV) of a perpetuity with zero growth

Answer 11

Cash Flow / Discount Rate

Question 12

NPV

Answer 12

NPV = R / (1+i)^t

R = net cash flow at time t
i = discount rate
t - time of the cash flow

you need to find sum of cash flows for different times

Question 13

Rate of Return

Answer 13

Current Value - Original value / (original value)

Question 14

weighted average cost of capital (WACC)

Answer 14

the average rate that a business pays to finance its assets

It is calculated by averaging the rate of all of the company’s sources of capital (both debt and equity), weighted by the proportion of each component.

WACC = [(Weightage of Equity X Cost of Equity) + (Weightage of Debt X Cost of Debt)] * (1 - Tax Rate)]