PVGA Formula if g =0 If g < r, and n tend infinity If g = 0, n tends infinity

𝐶𝐹! 1+𝑔 " 𝐶𝐹! 1 " 𝐶𝐹! 𝐶𝐹!

𝑃𝑉𝐺𝐴 = [1 − . ) 1 𝑃𝑉𝐴 = [1 − . ) 1 𝑃𝑉𝐴 = 𝑃𝑉𝑃 =
𝑟−𝑔 1+𝑟 𝑟 1+𝑟 𝑟−𝑔 𝑟

! Retained Earnings Per Share= 𝐸𝑃𝑆 − 𝐷0

Cost of Equity (Kd)= Rf+Beta*ERP(Rm-Rf). Payout Ratio "#$!
!
#$%! &'!
Retention Ratio= or 1 − Payout Ratio
#$%!

𝐾' = 10 𝑦𝑟 𝑔𝑜𝑣𝑡 𝑏𝑜𝑛𝑑 𝑦𝑖𝑒𝑙𝑑 + 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑑𝑒𝑓𝑎𝑢𝑙𝑡 𝑠𝑝𝑟𝑒𝑎𝑑

#()* 3""435 6+7+6-"6 '!
Bond: YTM as cost of debt Interest Coverage Ratio/Synthetic Ratings = Preferred Stock= current yield = = =𝑦
+",-.-/, -12-"/- 2.+8- 2-. /93.- $

Convertible Bond (partly debt and equity) Invested Capital = OA+OL = OL – D+DE+E+EE-NOA
Straight debt= PV (PMT = 5, FV=125, N=10,I/Y 8%)
Equity option = MV of CV – Straight Debt Value

:;(<* :-, )"8>?-

ROE= ROIC +D/E [ROIC -Kd(1-t)]
‘ =
ROIC
)"7-/-6 =32+,35
ROE=
#@4+,A (<7C(A.DE-C -"6/G)
Free Cash Flow to Equity
Free Cash Flow to Firm Net Income – Capital Expenditure – Change in OWC - (Debt inflow - outflow)
FCF = NOPAT + Non-Cash Operating Expenses – Investment Operating Assets
= NOPAT – Net CAPEX – Change in OWC Lease Incorporation (retail stores recognized as Assets)
FCF = NOPAT x (1- RIR) Adjusted EBIT = Reported EBIT + Implicit Interest Expense Y0
C
RIR = Implicit Interest Expense= Kd x average lease liabilities
I;:)=/I;)=

R&D Expense on Assets Stock Compensation

Change in EBIT or NOPAT = R&D Expense – Amortization FMV of vested and unvested options = [Vested +(unvested x forfeiture rate)] * Fair MV
Adjusted RSU = Outstanding RSU x (1- forfeiture Rate)
Value per common share = (equity value – FMV options)/ (Outstanding shares + adjusted RSU)
Stock Split = normal: 1 to more price decrease, reversal 1 to many price increase
New price = share price/ ratio of split

Assignment Useful Equations

EBIT = Revenue * Operating Margin
FCFF=NOBAT – Increased capital investment
ROIC = NOPAT/ (Average Invested Capital)
EBITDA= EBIT+ Depreciation + Amortz
Net CAPEX= CAPEX – Depreciation
Wacc= Cost of equity x weight + after-tax cost of debt x weight
OWC and revenue, change in one can help change in other OWC/Revenue
NOPAT X 1-RIR/1-G = terminal value
NOPAT = RIR * ROIC
RIR= G/RONIC OR ROIC
Intrisitc value of equity = value of operating assets + cash – value of third party interest – MV
of debt (floating bank loans)
Debts don’t include DTL and AP
Wacc = equity* cost of equity + pregered shares PV *current yield+ pv bonds*ytm *after tax