Finance 301
Spring 2023 Final Exam
Formula Sheet
Chapter 7 - Interest Rates and Bond Valuation
Coupon Rate = Annual Coupon Payment/Bond Face Value
Bond Value = Present Value Coupon Annuity + Present Value Bond Face Value
= C [(1-{1/(1+r)t})/r] + Face Value/(1 + r)t
Yield to Maturity = Solve above equation for “r” via trial and error OR via financial
calculator.
Fisher Effect: 1+ Nominal Return (R) = Real Return (1+r) X Inflation (1+h) - or 1+R = (1+r) X (1+ h) = 1+(r+h) + rh
Chapter 8 - Stock Valuation
Dividend Growth Model = Pt = [Dt x (1+g)]/(r-g) = Dt+1/(r-g)
Cumulative Votes Needed to Win Election = 1/(1+N) + one share
% Dividend Yield = Annual Cash Dividend/Current Stock Price = D1/P0
Chapter 9 - NPV and Other Investment Criteria
Payback = Length of time until summation of project’s cash flows = original cost.
IRR = Discount Rate (r) That Makes NPV = Zero.
NPV = - Initial Cash Outflow + CFt/(1+r)t
Chapter 10 - Making Capital Investment Decisions
Annual MACRS Depreciation = MACRS % for that year X Asset cost
Depreciation Tax Shield = Annual Depreciation X Tax Rate
OCF = EBIT + Depreciation - Taxes
EBIT = Sales - Costs - Depreciation
Chapter 11 - Project Analysis and Evaluation
Accounting Break Even: Sales - Variable Costs - Fixed Costs - Depreciation = 0
Accounting Break Even Quantity: Q = (Fixed Costs + Depreciation)/(Price - Variable Costs)
General Break Even Quantity: Q = (Fixed Costs + Operating Cash Flow)/(Price - Variable Costs)
Cash Break Even Quantity: Q = (Fixed Costs)/(Price - Variable Costs)
Chapter 12 - Some Lessons from Capital Market History
Percentage Return = Total Dollar Return/Initial Investment
- or [Dividend @ End of Period + Change in Market Value]/Beginning Market Value
1+ Nominal Return (R) = Real Return (1+r) X Inflation (1+h)
Variance = 1/(T-1) X [(R1 - Ravg)2 + …..+ (RT - Ravg)2]
Standard Deviation = Square Root of the Variance
Finance 301
Spring 2023 Midterm Exam
Formula Sheet
Chapter 2 - Financial Statements, Taxes, and Cash Flow
Operating Cash Flow = Earnings Before Interest and Taxes + Depreciation - Taxes
Net Capital Spending = Ending Net Fixed Assets - Beginning Net Fixed Assets +
Depreciation
Change in Net Working Capital = Ending Net Working Capital - Beginning Net
Working Capital
Net Working Capital = Current Assets - Current Liabilities
Cash Flow from Assets = Operating Cash Flow - Net Capital Spending - Additions to Net
Working Capital
Chapter 3 - Working With Financial Statements
Current Ratio = Current Assets/Current Liabilities
Debt/Equity Ratio = Total Debt/Total Equity
Return on Equity = NROS% x Asset Turnover x Equity Multiplier
Return on Equity = Net Income/Sales x Sales/Total Assets x Total Assets/Total Equity
Chapter 4 - Long-Term Financial Planning and Growth
External Financing Needed = Shortfall needed to balance Liabilities + Equity to Total
Assets for a given growth rate in Sales
Internal Growth Rate = [ROA x b]/[1 - (ROA x b)]
Internal Growth Rate = [Return on Assets x Retention Ratio]/[1 - (Return on Assets x
Retention Ratio)]
Return on Assets = Net Income/Total Assets
Retention Ratio (b) = Additions to Retained Earnings/Net Income = (1 - Dividend
Payout)
Sustainable Growth Rate = [ROE x b]/[1 - (ROE x b)]
Sustainable Growth Rate = [Return on Equity x Retention Ratio]/ [1 - (Return on Equity
x Retention Ratio)]
Chapter 5 - Introduction to Valuation: The Time Value of Money
Future Value = Present Value x (1 + r)t
Present Value = Future Value/(1 + r)t
Rule of 72:
72/r = t or 72/t = r (Approximate rate or time to double your money)
Chapter 6 - Discounted Cash Flow Valuation
Present Value of a Perpetuity = C/r
Present Value of an Annuity = C [(1-{1/(1+r)t})/r]
Future Value of an Annuity = C[((1+r)t -1)/r]
Effective Annual Return = [1 + (Quoted Rate/m)]m - 1