Summary of Discrete Compounding Formulas with Discrete Payments t eo rae Cash Flow | Flow Type Diagram s ‘Compound F=Patiy | 1 amount = FVG,N, P..0) N WRN) i is Present i jou worth Pm Rta = PV(i.N. F..0) } lig (PEIN) ’ | [EJ compome : |e amoun aes | D (HAAN) | PVG,N.A..0) ' j A Po { ’ tina PMTG.N, PFO ey A (AEiN) 0123 Nally | i a aaa aa | | E |S ie —— | T worth pa afta a . | iy (PAIN) Caa+ar evan. aco aaa aa | |e Att th | [oR Capital reany | joa recovery = PMT(.N.P) | |e (APN) | s i c Lest i R sradient | A wag | D Present 2Ge-fh | 1 worth aN | E PGiN) T3NCIN | N ‘Conversion factor| Pp { T (A/G IN) Pos Geometric E eradion R 1 Present E worth Ss (PIA, gi N)Summary of Formulas Effective Interest Rate per Payment Period Discrete compounding i= |(1+r/(CK)JO~ 1 Continuous compounding i = &”* = 1 where / = effective interest rate per payment period c nominal interest rate or APR umber of interest periods per pa period K = number of payment periods per year 1K = nominal interest rate per payment period Market Interest Rate bart psey where 7-= market interest rate inflation-free interest rate reneral inflation rate Present Value of Perpetui A p- Capital Recovery with Return CRU) = (= S\(AIPLIN) + iS Book Value bv,=1- 30, traight-Line Depres Declining Balance Depreciati D, = al(1 ~ ay" where @ = declining balance rate.and 0 < a =~ Cost of Equity ry * Bly ~ rl where i, = cost of equity 1 = tisk-free interest rate Modified ACRS Factors CO ] | RS Facies | } Recovery Period (Years) | Teer 3 hoa tos | 6 ; 7 Dos 9 | hou B = market related risk index market rate of return Cost of Debt ie= (2) = a+ (S)ha0t 1) where iy = cost of debt 6, = the amount of term loan 5 = the amount of bond financing Gj = total debt = ¢, 1, = the before-tax interest rate on the term loan ky = the beforestax interest rate on the bond ‘uy = the firm's marginal tax rate ‘ighted—Average Cost of Capital voy ke where & = cost of capital = total equity capital