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Cash Flow PV R CF PV RG: FCF NPV Initial T R

This document provides formulas for key finance concepts including: 1) NPV, perpetuity, annuity, expected return, variance, covariance, correlation, Sharpe ratio, CAPM, beta, WACC, debt capacity, put-call parity, binomial tree model, Black-Scholes formula. 2) It outlines the formulas used to calculate historical variance, covariance, correlation, variance of a portfolio, beta with and without taxes, pre-tax and after-tax WACC, levered return on equity, debt capacity, one-period binomial tree model, risk neutral probabilities model, and the Black-Scholes formula. 3) The formulas are for concepts commonly assessed on a finance

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Mindaugas Pinčiukovas
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96 views

Cash Flow PV R CF PV RG: FCF NPV Initial T R

This document provides formulas for key finance concepts including: 1) NPV, perpetuity, annuity, expected return, variance, covariance, correlation, Sharpe ratio, CAPM, beta, WACC, debt capacity, put-call parity, binomial tree model, Black-Scholes formula. 2) It outlines the formulas used to calculate historical variance, covariance, correlation, variance of a portfolio, beta with and without taxes, pre-tax and after-tax WACC, levered return on equity, debt capacity, one-period binomial tree model, risk neutral probabilities model, and the Black-Scholes formula. 3) The formulas are for concepts commonly assessed on a finance

Uploaded by

Mindaugas Pinčiukovas
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Formula Sheet Finance Exam

NPV T
FCFt
NPV = ∑ − Initial cos t
t =1 (1 + r )t

Perpetuity Cash Flow


PV0 =
r
Growing perpetuity CF1
PV0 =
r−g

Annuity 1 1
PV0 = CF × −
r r (1 + r )t

Expected return of a value of investment i


portfolio E [ RP ] = ∑ i xi E [ Ri ], where xi =
total value of portfolio

Variance and standard


deviation of a stock

Historical variance

Covariance of two stocks

Historical covariance

Correlation coefficient

Variance of a portfolio of
two stocks

Variance of a portfolio of
many stocks

Sharpe ratio

CAPM
E ( Ri ) = ri = rf + βiMkt (E ( RMkt ) − rf )
Beta
SD(Ri ) × Corr (Ri ,RMkt ) Cov(Ri ,RMkt )
βiMkt ≡ =
SD(RMkt ) Var (RMkt )
Unlevered beta without
taxes E D
β A = βU = βE + βD
E + D E + D
Pre-tax WACC:
E D
rU = rA = pre − tax rwacc = rE + rD
E + D E + D
Levered return on equity D
rE = rU + (rU − rD )
E
After-tax WACC
E D D
after − tax rwacc = rE + (1 − τ c ) rD = rU − τ c rD
E + D E + D V
Debt capacity
Dt = d × Vt L
Put-Call Parity C = S + P − PV ( K ) − PV ( Div)

One-period Binomial
Tree model
Su ∆ + (1 + rf )B = Cu
S d ∆ + (1 + rf )B = Cd
C − Cd C − Sd ∆
∆ = u and B = d
Su − S d 1 + rf

C = S∆ + B
Risk neutral probabilities ρ Su + (1 − ρ )S d
model − 1 = rf
S
Black-Scholes C = S × N (d1 ) − PV (K ) × N (d 2 )

ln[S / PV (K )] σ T
d1 = + and d 2 = d1 − σ T
σ T 2

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