Glossary 2 Flashcards
Capital structure
The composition of the invested capital of the business enterprise
DCF
Discounted cash flow
Debt-Free Cash Flow (DFCF)
DFNI plus depreciation and amortization, less capital expenditures, less incremental debt-free working capital
Debt-Free Net Income (DFNI)
Net income (after tax) plus interest expense (net of related tax deduction) related to invest capital holders.
Debt-Free working capital
current assets, less current liabilities, excluding short-term interest-bearing debt
Earning Cap Rate
The cap rate attributable directly to equity
ESOP
Employee stock ownership plan
Net Assets
Total assets less total liabilities
Terminal Value
Sometimes also called residual value or future value, it is the prospective value as of the end of the discrete forecast period.
After-Tax Interest on Debt
kd = Marginal Borrowing Rate (1 - Marginal tax rate)
Beta
Bu = B1 / {(1+[(1-t)(D/E)]}
Br = Bu{1+[(1-t)(D/E)]}Build up Method
Ke = Rf + (RPm) +RPs +RPu
Capitalization Rate
Cap Rate = Discount rate - Long-Term Growth Rate
CAPM Capital Asset Pricing Model
ke = Rf + (RPm)B
Modified CPAM Capital Asset Pricing Model
ke = Rf + (RPm)B +RPs + RPu
Weighted Average Cost of Capital (WACC)
WACC = We(ke) + Wd(kd)
Bl
Levered Beta
Br
Re-levered beta
Bu
unlevered beta
E(Ri)
Expected rate of return on security i
EBITDA
Earnings before deprecation, interest and taxes
g
long term rate of growth
kd
after tax discount or interest rate for debt
ke
Discount rate for common equity capital (cost of common equity capital). Unless otherwise stated, it generally is assumed that this discount rate is applicable to net cash flow available to common equity
