Key Exam Cards Flashcards
Loan repayment - total amount in dollars paid on the loan =
The set annual payments x the number of years
Loan repayment - total interest paid on the loan =
Sum of set annual payments - beginning balance
Investment outlay =
Cost of project + Any additional instillation costs
Terminal value =
Sale value - Adjusted tax value x tax rate = x. Sales value + x = Terminal value
Average accounting return on investment =
(Sum of net profits after tax per year/number of years)/Investment outlay
Payback period =
Investment outlay - Operating cashflows until the point comes where the next subtraction will go below zero. Add the number of years it took to the investment outlay - the operating cash flows within that number of years/the nest operating cash flow + terminal value.
NPV =
-Investment outlay + Operating cash flow from Year 1/(1.WACC)1 + Operating cash flow from Year 2/(.WACC)2 + Operating cash flow from Year 3 (Plus terminal value)/(1.WACC)3 =
Cash conversion cycle =
Days of inventory + Accounts receivable collection - Accounts payable paid = AAI + ACP - APP
Implicit cost of foregoing cash discount =
Calculate cash discount. If cash discount is greater than the overdraft rate then accept discount, if lower then reject.
Capital structure =
Long term debt/(LTD - Ordinary Share Equity)
Owners Equity =
1 - Capital structure
Weighted Average of Capital (WACC) =
Capital structure % x Before tax cost of LTD x (1-Income tax rate) + Owners Equity % x Before tax cost of OSE = x
Mean returns =
Sum of all returns/number of years
Standard deviation
(Returns from Year 1 - Average return)2 + (Returns from Year 2 - Average return)2 + (Returns from Year 3 - Average return)2 + (Returns from Year 4 - Average return)2/Number of years -1 = x, Then square root of x = answer
