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+ = ) 1 (
n
i n
i FVIF ) 1 (
,
+ =
Present value
n
n
i
FV PV
|
.
|
\
|
+
=
1
1
or
m n
m n
m i
FV PV
|
.
|
\
|
+
=
/ 1
1
n
i n
i
PVIF
|
.
|
\
|
+
=
1
1
,
Future value of an annuity
(
+
=
i
i
PMT FV
n
n
1 ) 1 (
(
+
=
i
i
FVIFA
n
i n
1 ) 1 (
,
Present value of an ordinary annuity
(
+
=
i
i
PMT PV
n
) 1 ( 1
(
+
=
i
i
PVIF
n
i n
) 1 ( 1
,
Future value of an annuity due
( ) i
i
i
PMT FV
n
n
+
(
+
= 1
1 ) 1 (
Present value of an annuity due
( ) i
i
i
PMT PV
n
+
(
+
=
1
) 1 ( 1
PV of perpetuity
Interest rate
1 =
n
n
PV
FV
i OR 1
1
|
.
|
\
|
=
n
n
PV
FV
i
Nominal interest rate Rr R r i + + =
Taxes
Imputation Credit = Grossed-up Dividend
- Dividend Received
Grossed-up Dividend = Dividends
Received +
Imputation credit
) 1 ( U T T
eff
=
Valuation of securities
Intrinsic value of an ordinary share
g R
D
V
E
E
=
1
Intrinsic Value of an Irredeemable Preference
Share
p
p
R
D
V =
Value of a bond
=
+
+
+
=
n
t
n
b
t
b
t
b
R
M
R
I
V
1
) 1 ( ) 1 (
n
b b
n
b
b
R
M
R
R
I V
) 1 (
) 1 ( 1
+
+
(
+
=
M PVIF I PVIFA V
b b
R n R n b
+ =
, ,
Value of a redeemable preference share
=
+
+
+
=
n
t
n
P
t
P
t
p
R
M
R
D
V
1
) 1 ( ) 1 (
M PVIF I PVIFA V
p p
R n R n b
+ =
, ,
n
p p
n
p
p
R
M
R
R
I V
) 1 (
) 1 ( 1
+
+
(
(
+
=
Risk and return
Capital assets pricing model
) (
f j f j
R Rm R R + = |
Beta of a portfolio
=
=
n
i
i i p
w
1
| |
Holding period return
( )
1
1
+
=
t
t t
t
P
P DIV
R
Average return
n
R
R
n
i
i
=
=
1
Expected return
=
=
n
i
i i
R P R R
1
*
) (
Standard deviation of expected return
=
=
n
i
i i
R P R R
1
2 * *
) ( ) ( o
Standard deviation of return
( )
1
1
2
=
=
n
R R
n
i
i
Expected return of a portfolio
=
=
n
i
i i p
R w R E
1
) (
Standard deviation of two-asset portfolio
B A AB B A B B A A P
CORR w w w w o o o o o . . . . . 2 .
2 2 2
.
2
+ + =
)(
Covariance Correlation
B A
AB
AB
o o
o
=
Beta
Leverage
Break-even Point
V P
F
BEP
quantity
=
) (
] / ) [( 1
) (
S VC
F
BEP
Voluem
Degree of Combined Leverage
Degree of financial leverage
Degree of operating leverage
Cost of capital
Cost of equity before tax
g
NP
T D
K
BT E
+
=
0
1
,
) 1 /(
Cost of equity after tax
g
NP
D
K
AT E
+ =
0
1
,
Calculating growth rate (g) of dividends
1
0
= n
n
D
D
g
OR
1
1
0
|
|
.
|
\
|
=
n
n
D
D
g
Expected dividend at n
th
period
n
n
g D D ) 1 (
0
+ =
Cost of preference shares (before tax)
p
p
BT P
NP
T
D
K
) 1 (
,
=
Cost of preference shares (After tax)
p
p
BT P
NP
D
R =
,
Cost of bonds before tax
2 / ) (
/ ) (
0
0
,
NP M
n NP M I
K YTM
bt d
+
+
= =
Cost of debt after tax
) 1 (
, ,
T K K
bt d at d
=
Profitability index
IO
k
ACF
PI
n
t
t
t
=
+
=
1
) 1 (
Net present value
IO
k
ACF
NPV
n
t
t
t
+
=
=1
) 1 (
Formula to find indifference level of EBIT
( )(1 ) ( )(1 )
s b
EBIT I T PREFF EBIT I T PREFF
S S
=