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Ross6 Formula Sheet With Cover Page v2
Ross6 Formula Sheet With Cover Page v2
Formula Sheet
page #
Assets = Liabilities + Shareholders’ equity [2.1] 28
Net working capital to total assets = Net working capital/Total assets [3.4] 65
Long-term debt
Long-term debt ratio = ᎏᎏᎏᎏ
Long-term debt + Total equity
[3.9] 67
1
NWC turnover = Sales/NWC [3.16] 69
= $2,311/($708 – $540) = 13.8 times
Market-to-book ratio = Market value per share/Book value per share [3.23] 71
= $157/($2,591/33) = $157/$78.5 = 2 times
2
ROE = p(S/A)(1 + D/E) [4B.2] 116
= C × 冦ᎏ ᎏ冧
t
1 – 1/(1 + r)
r
1 + R = (1 + r) × (1 + h) [7.3] 197
R=r+h+r×h
D × (1 + g)
0 1 D
P0 = ᎏ ᎏ = ᎏᎏ
r–g r–g
[8.3] 219
D × (1 + g)
t D
Pt = ᎏ ᎏ = ᎏt ᎏ
+1 [8.4] 219
r–g r–g
3
OCF = (S – C – D) + D – (S – C – D) × Tc [10.2] 281
= (S – C – D) × (1 – Tc) + D
= Project net income + Depreciation
= $120 + 600
= $720
S – VC = FC + D [11.1] 319
P × Q – v × Q = FC + D
(P – v) × Q = FC + D
Q = (FC + D)/(P – v)
Total dollar return = Dividend income + Capital gain (or loss) [12.1] 340
Total cash if stock is sold = Initial investment + Total return [12.2] 340
= $3,700 + 518
= $4,218
P = 兹苶
2P
4
Announcement = Expected part + Surprise [13.7] 382
N
␦2P
ᎏᎏ = 2 冱 xji2 = 2[x1COV(R1,R2) + x222 + x3 COV(R3,R2) [13A.3] 408
␦x2 j=1
+ . . . + xNCOV(RN,R2)]
COV(R ,R )
2 M
2 = ᎏ ᎏ
2(R )
[13A.4] 408
M
Equity
Unlevered firm = ᎏ ᎏ × Equity
Debt + Equity
[14A.2] 442
Equity
Unlevered firm = ᎏᎏᎏ
Equity + (1 – T ) × Debt
× Equity [14A.3] 442
C
Number of rights needed to buy a share of stock = Old shares/New shares [15.2] 466
= 1,000,000/500,000 = 2 rights
5
Ro = (Mo – S)/(N + 1) [15.3] 468
where
Mo = common share price during the rights-on period
S = subscription price
N = number of rights required to buy one new share
Me = Mo – Ro [15.4] 469
Re = (Me – S)/N [15.5] 469
EBIT
DFL = ᎏ ᎏ
EBIT – Interest
[16.2] 483
VL = VU + TC × D [16.7] 491
(1 – T ) × (1 – T )
VL = VU + 冤 1 – ᎏ C
ᎏ
(1 – T )
S
冥×B [16A.1] 512
b
Net working capital + Fixed assets = Long-term debt + Equity [18.1] 547
Average daily float = Average daily receipts × Weighted average delay [19.1] 586
= $266,666.67 × 7.50 days = $2,000,000
6
Opportunity costs = (C/2) × R [19A.1] 600
C* = 兹苶 苶
(2T × F)/R [19A.4] 601
U* = 3 × C* – 2 × L [19A.6] 603
Total carrying costs = Average inventory × Carrying costs per unit [20.11] 627
= (Q/2) × CC
Total restocking cost = Fixed cost per order × Number of orders [20.12] 629
= F × (T/Q)
Q* = 冪ᎏ
莦
2T × F
CC
ᎏ [20.16] 629
Q* = 冪ᎏ
莦
2T × F
CC
ᎏ [20.17] 629
7
NPV = –PQ + P’Q × (d – )/R [20A.2] 642
C0 ⱕ S0 [25.3] 760
Call option value = Stock value – Present value of the exercise price [25.6] 764
C0 = S0 – E/(1 + Rf)t