1HR CP 115.114 S1 2020 ALB Internal Formula Sheet Chapter 5 Annuity – future value Annuity due (FV) – regular payments (1 + r )n − 1 FVA = PMT r (1 + r)n − 1 FVAnnuity due = PMT (1 + r) r Annuity – present value Annuity due (PV) – regular payments 1 − (1 + r )-n PVA = PMT r 1 - (1 + r)-n PVAnnuity due = PMT (1 + r) r Annuity (FV) – regular payments PMT = FVA × r (1 + r )n − 1 Annuity (PV) – regular payments PVA × r PMT = -n 1 − (1 + r ) Chapter 6 Risk-free interest rate = Real interest rate + Expected inflation Nominal interest rate = [(1 + Real interest rate) × (1 + Expected inflation rate)] – 1 Nominal interest rate ≈ Real interest rate + Expected inflation rate Real interest rate ≈ Nominal interest rate – Expected inflation rate Nominal return = Risk-free return + Risk premium Risk premium = Nominal return – risk-free return 1 + Nominal interest rate − 1 Real interest rate = 1 + Rate of expected inflation Holding period return EV + C HPR = BV r Annual holding period return Annual HPR = HPR Mean 1 n Annual holding period yield Annual HPY = Annual HPR – 1 = ∑r n Capital Asset Pricing Model CAPM ri = rf + βi(MRP) ALB Internal 1HR CP Variance σ2 = Expected return n r ∑ (ri − r ) i=1 2 = n ∑r × probability i i=1 n-1 Variance σ2 Standard deviation Standard deviation = variance = σ = n ∑ (r - r ) × probability i=1 2 i i 2 i Chapter 7 Assets – Liabilities = Net Worth Chapter 8 Net profit after taxes = Income – Expenses EPS = Net profit after taxes Number of ordinary shares on issue Chapter 9 Cash discount CD = 365 D × N 100% − D Average payment period APP = Accounts payable Averag purchases per day Cash conversion cycle CCC = AAI + ACP – APP Chapter 10 Debt ratio = Total liabilities Total assets Debt - equity ratio = Long - term debt Shareholders' equity Cost of debt rd = ri × (1 − t ) Cost of preference shares C rp = 1 PV Weighted average cost of capital rcc = (rd × wd) + (rp × wp) + (re × we) Average collection period ACP = Accounts receivable Average credit sales per day Average age of inventory Inventory AAI = Average materials purchased per day 1HR CP 1902/115.114 ALB Internal Page 3 of 3