CHAP 2

Net income dividends paid

EPS = Dividend per share =
total shares outstanding total shares outstanding

Net income = addition to retained earnings + dividends Marginal tax rate

paid tax paid this year−tax paid last year
¿
(nhớ là operating income đã bao gồm depreciation taxable income this year−taxable income last year
expense, và addition to retained earnings và dividends
nằm sau net income) tax paid this year
Average tax rate ¿
taxable income this year

the cash flows received from the firm’s assets (that is, its operating activities), CF(A), must equal the cash flows to
the firm’s creditors, CF(B), and equity investors, CF(S):
CF(A) ≡ CF(B) + CF(S)
1. CF(A) = OCF - Capital spending - 2. CF(B) = Debt service - long-term debt
Additions to net working capital financing = Interest paid - Net new
borrowing = Interest paid - (Ending
long-term debt - Beginning long-term
debt)

Cash increased in the year = OCF + investing CF +
financing CF
OCF: Operating cash flow
a.OCF = EBIT (Earnings before interest and taxes) +
Depreciation - Current taxes
(Current tax = net income – pretax income)
OCF = Net income + noncash expenses + Net working
capital
Debt service = Interest paid + retirement of debt =
Interest paid – (new debt – repayment of old debt)
3. CF(S) = Dividends paid - Net new
equity raised = Dividends paid - (Stock
sold - Stock repurchased)

b. Capital spending = Acquisitions of fixed assets - sales

of fixed assets = Ending net fixed assets - Beginning net
fixed assets + Depreciation
c. Additions to net working capital = Current assets -
Current liabilities
Net working capital: changes in current assets and
liabilities (other than cash and notes payable)

CHAP 3
EV = market value of outstanding shares of stock + market value of outstanding interest bearing debt - cash on hand

Total assets Total equity+total debt

Equity multiplier= = =1+ Debt – equity ratio
Total equity total equity
1
DuPont identity = Profit margin × ×(1+ Debt−equity ratio)
Capital intensity ratio
The projected addition to retained earnings = PM × Projected sales × (1 − Dividend payout ratio)

b = 1 − Dividend payout ratio

CHAP 4
Net present value (NPV) = present value (PV) of the
future cash flows - initial cost

C1: cash flow at date 1

r: the rate of return, also called discount rate
Value at the end of year T with continuous
compounding = C0 * er*T
m: period, m=4 if compounded quarterly
T: years
C0: the initial investment
Future Valuein year N = money invested*(1+ interest*N) r: stated annual interest rate
(simple interest)
Future Valuein N year =money invested*(1+rate)N
(compounded annually interest) Continuously compounding interest = er - 1

Amount earned more after N year if the interest had

compounded annually = FVsimple – FVcompounded = money
invested*(1+rate*N) - money invested*(1+rate) N
APR = rate for days paid for int * 365/days paid for EAR = (1 + quoted rate/m)m – 1 = (1 + r)365/ days paid for interest
interest = rate per period*period = ((1+EAR) 1/period – 1)* rate
– 1 = (1 + r)1/periods– 1 = (1+APR/period)period – 1
period
Period: month = 12, quarter = 4
CHAP 5
CF year 1 CF year 2 CF year 3 NPV > 0: accepted; NPV < 0: rejected (NPV>0: the
NPV =−initial cost + + +
1+ r ( 1+r )2 (1+r )3 stockholders' value in the firm is expected to
increase); NPV = 0: any delay in receiving the
projected cash inflows will cause the project's NPV to
 PV = NPV + initial cost
be negative

Profitability index (PI): Payback period

Cash flow year 1 CF year 2 CF year 3 initial cost−CF year 1−CF 2−…−CF N −1
( + + + …) ¿
1+ r ( 1+r )2 ( 1+r )3 CF year N
initial cost
PI >1: accepted, PI<1: rejected

Internal rate of return (IRR): Discounted payback period = Madatory discount rate
CF year 1 CF year 2 Year 1 – year 3: 2 period
0=−initial cost + + +…
1+ IRR ( 1+ IRR )2 CF year 1 CF year 2
DPB=2+initial cost − − ¿
Investing project: IRR ≥ r, accepted, IRR < r, rejected 1+r ¿¿
(financing project ngược lại: IRR < r accept)
 incremental IRR (given project A and B):

CF 1 of A−CF 1 B CF 2 A−CF 2 B
0=−initial cost of A− (−initial cost of B )+ + +…
1+ IRR ( 1+ IRR )2

CHAP 15
If cumulative voting is permitted

- the total number of votes that each shareholder may cast is determined:
(the number of shares (owned or controlled)) * (the number of directors to be elected)

- Total shares needed to guarantee yourself a seat:

1/(N + 1) percent of the stock + 1 share: (N: directors up for election)

- Total shares needed = 1/(N + 1) * number of shares outstanding + 1

- The cost you pay to ensure yourself a seat on the board
Total shares needed * market value
- Cost to acquire shares (trường hợp không đủ số shares needed):
(Total shares needed – shares owned) * market value
With straight voting

- Total number of votes is also the the number of shares (owned or controlled)
- the only way to guarantee a seat is to own 50 percent + 1 share
Expected value of bond in one year = (Probability × Price of bond) + (Probability × Callable price bond)

CHAP 16
V=B+S
V: the value of the firm
B: the market value of the debt (the value of the firm’s
bonds or debt). RB
S: the market value of the equity (the value of the is the cost of debt (pretax).
firm’s stock or equity) R0: the cost of capital for an all-equity firm (RWACC = R0)
 R0 = RU + (B/S)*(1 – TC) * (RU - pretax cost of
debt)

annual interest tax shield = numbers of shares outstanding*face value*coupon rate*tax rate
Annual tax shield on debt = numbers of bonds outstanding*face value* coupon rate*tax rate
PVtax shield = tax rate * amount of debt
KHÔNG CÓ THUẾ CÓ THUẾ:
MM I: VL = VU
B
MM II: R ( S )=R ( 0 ) + ∗( R ( 0 )−R ( B ) )
S

MM II
B
R ( S )=R ( 0 ) + ∗( R ( 0 )−R ( B ) )∗(1−t ( c ))
S
B/S = equity multiplier – 1

Chap 19

Total value = (dividend per share*(1+percent earned from funds) + final liquidating dividend)*total shares owned

Cash flow = Capital expenditures + Dividends

Div1 and Div0: dividends in the next year and dividends in the current year, respectively. EPS 1 is earnings per share in
the next year.

Market value after stock dividend =

initial total market value initial market value per share∗number of shares before stock dividend
=
number of shares after stock dividend number of shares after stock dividend

¿ final liquidating dividend

Value per share (P0) ¿ dividend ∈1 year ¿ today +
1+ required rate of return (1+required rate of return)2

Small stock dividends (less than 20-25%) Large stock dividends (>20-25%)
=> increase common stock in par value => increase common stock in par value
=> excess capital: increase = market value – par value => excess capital: not change
=> retained earnings: giảm đúng = số tăng của common => retained earnings: giảm đúng = số tăng của common
stock và excess capital stock
The difference between a small and large stock dividend is that you value shares in a large dividend at par and
Stock split:
=> common stock, exess capital, retained earnings not change
=> par value decrease, shares increase (2 cái này tỉ lệ nghịch với nhau)
Vd: 3 for 2 stock split: par value = amount*(2/3) , Shares = amount*(3/2)
total equity not change through stock dividends and stock split
CHAP 26
1. ARyear end = amount collected in last quarter*collection period/days of 1 quarter
2. Days of 1 quarter = days one year / 4 = 360 / 4 = 90 (assume 1 year has 360 days)
3. Ending AR = Starting AR + Sales – Collections
4. Fourth quarter collections =
(days of 1quarter− AR period) AR period
∗sales amount of 4 th quarter + ∗sales amount of 3 rd quarter
days of 1 quarter days of 1 quarter
5. Quarter 3 disbursements =
(days of 1quarter− AP period ) AP period
∗3 rd quarter purchases+ ∗2 nd quarter purchases
days of 1 quarter days of 1 quarter
AR period AR period
6. Month collection = ∗sales of tháng cần tính+ ∗sales of previous month
days 1 month days 1 month
days one year days one year
7. Cash cycle = assets – liabilities = +days sales∈receivables−
inventory turnover payables turnover
8. Payables turnover = supplier purchases amount or COGS / average accounts payable
9. Operating cycle = Inventory period + Accounts receivable period = Cash cycle + Accounts
payable period (trong cash cycle có trừ account payable period rồi)
10. Net working capital + Fixed assets = Long-term debt + Equity
11. Net working capital = (Cash + Other current assets) - Current liabilities = current assets -
Current liabilities
12. Cash = Long-term debt + Equity + Current liabilities - Current assets other than cash - Fixed
assets
13. Amount borrowed = borrowed or 14. Effective interest rate = annual interest /
purchased amount / (1-compensating borrowed or purchased amount
balance requirement)
15. Annual interest = amount borrowed*int
rate
17. Cumulative surplus: the amount the firm can repay on its loan
18. Cumulative surplus = beginning cash balance + net cash inflow - minimum cash balance (due
to maitaining policy)