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Formula Sheet for Exam 3 | Principles of Finance | FIN 3403, Exams of Finance

University of South Florida (USF)Finance
Prof. Scott Besley

Formula Sheet Material Type: Exam; Professor: Besley; Class: Principles of Finance; Subject: Finance; University: University of South Florida; Term: Unknown 1989;

Typology: Exams

Pre 2010

Uploaded on 02/09/2009

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bg1
EQUATION SHEET
Principles of Finance
Exam 3
Cost of Capital
)T1(rTrr
debt with associated
savingsTax
returnofrate required'sBondholder
debtoftcos componenttaxAfter
ddd
NP
D
=
F)-(1
P
D
=
r
=
stockpreferredof costComponent
0
ps
0
ps
ps
s
0
1
RFMRF
sr
ˆ
=g+
P
D
ˆ
=)rr(+r=
r
=
arningseretainedof costComponent
β
s
g+
NP
D
ˆ
=g+
F)-(1
P
D
ˆ
=
r
=
equitynewof cost Component 1
0
1
e
)ror r( w + r w + rw =
equity
common
ofCost
x
equity
commonof
Proportion
+
stock
preferred
ofCost
x
stock
preferredof
Proportion
+
debt
ofcost taxAfter-
x
debt
of
Proportion
=WACC
esspspsdTdT
structurecapitalin thecapitalof type thisofProportion
given typeaofcapitalofcost lowerofamount dollar Total
=
PointBreak
WACC
Capital Structure
Q
Q
EBIT
EBIT
Sales
Sales
EBIT
EBIT
Sales
Sales
NOI
NOI ===
salesin changePercentage
NOIin changePercentage
=DOL=
leverageoperating ofDegree
EBIT
profitGross
=
F-VC-S
VC-S
=
F-V)(Q-P)(Q
V)(Q-P)(Q
=
DOL
EBIT
EBIT
EPS
EPS
=
EBITin changePercent
EPSin changePercent
=DFL=
leveragefinancial ofDegree
BEP][Financial-EBIT
EBIT
=
I-EBIT
EBIT
=DFL When there is no preferred stock.
pf2

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Download Formula Sheet for Exam 3 | Principles of Finance | FIN 3403 and more Exams Finance in PDF only on Docsity!

EQUATION SHEET

Principles of Finance

Exam 3

Cost of Capital

r r T r( 1 T )

associatedwithdebt

Taxsavings

rateofreturn

Bondholders'required

costofdebt

After taxcomponent

 d  d  d 

NP

D

P(1-F)

D

=r = ofpreferredstock

Componentcost

0

ps

0

ps ps

s 0

1 s (^) RF M RF r +g=ˆ

P

Dˆ

=r =r +(r r ) = ofretainedearnings

Component cost 

  • g NP

Dˆ

+g=

P(1-F)

Dˆ

=r = ofnewequity

Component cost 1

0

1 e

= w r + w r + w(r orr)

equity

common

Costof

x

equity

ofcommon

Proportion

stock

preferred

Costof

x

stock

ofpreferred

Proportion

debt

costof

After-tax

x

debt

of

Proportion

WACC=

dTdT psps s s e

Proportionofthistypeofcapitalin thecapital structure

Totaldollaramountoflowercostofcapitalofagiven type

BreakPoint

WACC

Capital Structure

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

Q

Q

EBIT

EBIT

Sales

Sales

EBIT

EBIT

Sales

Sales

NOI

NOI

= = = Percentagechangeinsales

PercentagechangeinNOI =DOL= operatingleverage

Degreeof

EBIT

Grossprofit

S-VC-F

S-VC

(Q P)-(Q V)-F

(Q P)-(Q V)

DOL =

 

  

 

 

  

 

EBIT

EBIT

EPS

EPS

= PercentchangeinEBIT

PercentchangeinEPS =DFL= financialleverage

Degreeof

EBIT-[FinancialBEP]

EBIT

EBIT-I

EBIT DFL = When there is no preferred stock.

=DTL= = x =DOLxDFL totalleverage

Degreeof

EBIT

EBIT

EPS

EPS

Sales

Sales

EBIT

EBIT

Sales

Sales

EPS

EPS

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

[Q(P-V)-F]- I

Q(P-V)

EBIT-I

S-VC

EBIT-[FinancialBEP]

GrossProfit

EBIT-[FinancialBEP]

EBIT x EBIT

GrossProfit DTL=

Dividend Policy

ofthestock

Marketprice

statedasadecimal

Percentstockdividend

outstanding

Numberofshares

retainedearnings

Dollarstransferredfrom

Planning and Control

Operating Breakeven Analysis

(P Q) TOC (V Q) F

fixedcosts

Total

variablecosts

Total

costs

Totaloperating

revenues

Sales

Degree of operating leverage—see the equations in the capital structure section

Financial Breakeven Analysis

Shrs

(EBIT I)( 1 T) D

Numberofcommonsharesoutstanding

Earningsavailabletocommonstockholders EPS

C

ps 

(1- T)

D

EBIT =I+

ps FinBE

Degree of financial leverage—see the equations in the capital structure section

Degree of total leverage—see the equations in the capital structure section

Rates/Taxes

togeneratesales level

Percentofcapacityused

Saleslevel Fullcapacitysales=

(1-MarginaltaxRate) taxableinvestment

Pretaxyieldon

taxableinvestment

After-taxyieldona

tax-freeinvestment

Equivalentyieldon

1 - Marginaltaxrate

Yieldon tax-freeinvestment

onataxableinvestment

Equivalentpretaxyield

^ 

Grossprofit margin

F

P

V 1

F S (^) OpBE 

 

  

 

Contribution margin

F

P V

F

Q (^) OpBE  