Formulas to Know Flashcards
Fundamental balance sheet relationship
total assets = total liabilities + total equity
Enterprise Value
EV = Market Cap + Total Debt - Cash
Market Cap
Market Cap = Shares Outstanding * Stock Price
Market to Book Ratio
M-to-B = Market Cap / Book Value of Equity
Levered Free Cash Flow
EBITDA - Change NWC - Capital Expenditure - Debt
(amount of cash a company has after paying debts)
Unlevered Free Cash Flow
NOPAT + D&A - Increase in NWC - Capex
(Cash before debt payments are made)
PV of a Lump Sum
PV = FV / (1 + r/)^t
rate
time
FV of a Lump Sum
FV = PV / (1+i)^n
Present Value of Growing Perpetuity
Cash Flow at t = 1 / (Discount Rate - Growth Rate)
(PV) of a perpetuity with zero growth
Cash Flow / Discount Rate
NPV
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
Rate of Return
Current Value - Original value / (original value)
weighted average cost of capital (WACC)
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)]