Chapter 4

= Amount of capital to be raised / right price per shares

Number of share issued
= Number of new shares : Number of existing issued
Terms of right issue
shares

TERP ( N x Cum¿ share price)+( R x¿ price)

¿
(N + R)

Debt beta is zero Debt beta is not zero

Ungeared
Ve Ve Vd ( 1−t )
Keu,
βa,
βa=βe ×
[ Ve+Vd (1−t) ] βeu=βeg ×
[ Ve+Vd ( 1−t )
+ βd
] [
Ve+Vd ( 1−t ) ]
βeu

Regeared,
Ve+Vd ( 1−t ) Vd (1−t )
Keg
βeg
βe=βa × [ Ve ] βe=βa+ ( βa−βd ) × [ Ve ]
Vd ( 1−t )
Keg=Keu+ ( Keu− Kd ) × [ Ve ]
Keg=Rf +(Rm−Rf )β

Chapter 5
 Without taxes With tax

Value of the firm Vu=Vg Vg=Vu+TB

Vg=Ve +Vd

WACC Keu=WACC Vdt

¿ Keu 1−
[ ( Ve +Vd )]
KegVe + Kd ( 1−t ) Vd
¿
Ve+ Vd
KeVe + Kd ( 1−t ) Vd
¿
Ve+ Vd

Cost of equity, Ke Vd Vd ( 1−t )

Keg, Keu
Keg=Keu+( Keu−Kd) × [ ]
Ve
Keg=Keu+ ( Keu− Kd ) [ Ve ]
Ke=Rf +( Rm−Rf ) β

Chapter 8

Asset based valuation

Book value
CIV method
profit
Excess post tax intangible average
the
¿
Industry cost of capital

[ FLG ' s profit−( Industry ' srate return x FLG' s tangible assets ) ] x (1−tax)
¿
Industry cost of capital

Earnings – based valuation

= P/E ratio x Net profit

= Share price x number of share (Market capitalisation)

Cash Flow Method

Dividend growth model

No growth

D0
¿
Ke

With growth
D1
¿
Ke−g
Discounted Cash Flow Method
Perpetuity
D1
¿
Ke−g

Chapter 9
Money Market

Step 1 USD 197,000

Step 2 FV
PV = =¿
n
(1+i( )
12
)

Step 3 Exchange rate

Step 4 n
FV =PV 1+i
( ( ))12
=¿