# MGT231 Formula Sheet

```FORMULA SHEET
Time value of money:
C
FV = C &times; (1 + π)π‘
PV of a perpetuity =
PV = (1+π)π‘
πΆ
πΆ1
PV of a growing perpetuity =
π
1−(1+π)−π‘
πΆ
1
π
(1+π)π‘
PV of annuity = &times; [1 −
PV of growing annuity =
πΆ1
π−π
Interest rates:
1+ EAR = (1+ APR/k)k
r = (1+ EAR)k/f-1
] =πΆ&times;[
&times; [1 − (
π
]
π−π
FV of annuity = πΆ &times; [
(1+π)π‘ −1
π
1+π
)]
with k the number of compounding periods; APR=Annual percentage rate=quoted rate
with f the number of payments within a year
Bond valuation:
1
1
π
π(1+π)π‘
Price of a Bond = πΆ &times; [ −
]+
Face Value
πΆ
=
(1+π)π‘
π
&times; [1 −
1
(1+π)π‘
] +
Future Value
(1+π)π‘
1 + Nominal rate = (1 + Real rate) ( 1 + inflation)
If f is the m-year forward rate in n years, then: (1 + rn)n(1 + f)m = (1 + rm + n)m + n
Dividend discount model:
Price of a share = π0 =
]
1+π π‘
DIV1
1+π
+
DIV2
(1+π)2
+. . . +
DIVπ
(1+π)π
DIV1
No-Growth Dividend Discount Model: π0 =
+
DIV1
π0
g = ROE x b
π
Constant-Growth Dividend Discount Model: π0 =
Expected Rate of Return Formula: π =
ππ
(1+π)π
DIV1
π−π
,
+ π ππ π =
π·πΌπ1
1
π0
+
π1 −π0
π0
```