MBA 64D – Financial Formula for F501 Mid Term

MBA 64D – Financial Formula for F501 Mid Term

Indicators: r = Annual Rate of Interest; n = Number of Years; m = Number of Period

Compounded in a year; C = Annual Cash Flow and / or Installment; PV = Present Value; FV
= Future Value.

1. 𝐹𝑉𝑛 = 𝑃𝑉0 × (1 + 𝑟)𝑛

𝑟
2. 𝐹𝑉𝑛 = 𝑃𝑉0 × (1 + )𝑚𝑛
𝑚

3. (𝐶𝑜𝑛𝑡𝑖𝑛𝑢𝑜𝑢𝑠 𝐶𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑖𝑛𝑔) ∶ 𝐹𝑉𝑛 = 𝑃𝑉0 × 𝑒 𝑟𝑛

𝐹𝑉𝑛
4. 𝑃𝑉0 =
(1+𝑟)𝑛

𝐹𝑉𝑛
5. 𝑃𝑉0 = 𝑟
(1+ )𝑚𝑛
𝑚

𝐶
𝐶 𝑟
6. (𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝐴𝑛𝑛𝑢𝑖𝑡𝑦) ∶ 𝑃𝑉𝐴𝑛 = −
𝑟 (1+𝑟)𝑛

𝐶
7. (𝑃𝑒𝑟𝑝𝑒𝑡𝑢𝑖𝑡𝑦) ∶ 𝑃𝑉𝐴𝑝𝑒𝑟𝑝𝑒𝑡𝑢𝑖𝑡𝑦 =
𝑟

𝐶
𝐶 𝑟
8. (𝐴𝑛𝑛𝑢𝑖𝑡𝑦 𝐷𝑢𝑒) ∶ 𝑃𝑉𝐴𝐷𝑛 = ( − ) × (1 + 𝑟)
𝑟 (1+𝑟)𝑛

𝐶
𝐶
9. (𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝐴𝑛𝑛𝑢𝑖𝑡𝑦) ∶ 𝐹𝑉𝐴𝑛 = ( −
𝑟
𝑟
(1+𝑟)𝑛
) × (1 + 𝑟)𝑛

𝐶
𝐶
10. (𝐴𝑛𝑛𝑢𝑖𝑡𝑦 𝐷𝑢𝑒) ∶ 𝐹𝑉𝐴𝐷𝑛 = ( −
𝑟
𝑟
(1+𝑟)𝑛
) × (1 + 𝑟)𝑛 × (1 + 𝑟)

𝑟 𝑚
11. 𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝐴𝑛𝑛𝑢𝑎𝑙 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑅𝑎𝑡𝑒 (𝐸𝐴𝐼𝑅) = [{1 + ( )} − 1]
𝑚

12. 𝐸𝐴𝐼𝑅𝐶𝑜𝑛𝑡𝑖𝑛𝑜𝑢𝑠 𝐶𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑖𝑛𝑔 = (𝑒 𝑟 − 1)

13. 𝑁𝑒𝑡 𝑃𝑟𝑒𝑠𝑒𝑛𝑡 𝑉𝑎𝑙𝑢𝑒(𝑁𝑃𝑉) = 𝑃𝑉𝐶𝑎𝑠ℎ 𝐼𝑛𝑓𝑙𝑜𝑤 − 𝑃𝑉𝐶𝑎𝑠ℎ 𝑂𝑢𝑡𝑓𝑙𝑜𝑤

{𝑟 × (1+𝑟)𝑛 }
14. 𝑅𝑒𝑝𝑎𝑦𝑚𝑒𝑛𝑡 𝐿𝑜𝑎𝑛 𝐴𝑚𝑜𝑟𝑡𝑖𝑧𝑎𝑡𝑖𝑜𝑛 = 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 × [ ]
{(1+𝑟)𝑛 −1}

Page 1 of 2
MBA 64D – Financial Formula for F501 Mid Term

15.𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 =

𝐸 𝐷
( × 𝑅𝑒 ) + { × 𝑅𝑑 × (1 − 𝑇𝑐 )}
𝑉 𝑉

WACC Formula Item Item Location

Value of Total Debt & Equity Financing V
Proportion of Equity Based Financing E/V
Proportion of Debt Based Financing D/V
Expected Return of Investors Re
Cost of Debt Rd
Corporate Tax Rate Tc
Weighted Equity Cost of Capital E/V × Re
Weighted Debt Cost of Capital D/V × Rd × (1 - Tc)

Page 2 of 2