110 110

1.08 1.05
101.8519 104.761904762
100 10 10%

650000 669500 686,237.5 6

1.06 5.853659
631603.8

85 0.5 42.5 0.30 25.5

100 0.2 20 0.45 45
110 0.1 11 0.25 27.5
73.5 98 1.333333

100 0.5 50 100%

100 0.2 20 400%
100 0.1 10 900%
80
1.25 25%

Profit
1 5,000,000 4,587,156 1
2 5,200,000 4,376,736 2
3 5,408,000 4,175,968 3
4 5,624,320 3,984,410 4
5 5,849,293 3,801,639 5
6 6,083,265 3,627,252 6
7 6,326,595 3,460,864 7
8 6,579,659 3,302,109 8
9 6,842,845 3,150,636 9
10 7,116,559 3,006,111 10
11 7,401,221 2,868,216 11
12 7,697,270 2,736,647 12
13 8,005,161 2,611,113 13
14 8,325,368 2,491,337 14
15 8,658,382 2,377,055 15
50,557,250

650000 950000
7% 9,285,714 13,571,429
9,676,241.01
-1000000
6% 8,676,241.01
0
1 588,235,294.12
2
3
4 1.219391084905 21.94%
5 4500 4245.283
6 4500 4004.984
7 4500 3778.287
8 4500 3564.421
9 4500 3362.662
10 4500 3172.322
11 4500 2992.757
25120.72 19897.96033848

600,000.000
6,666,666.667
 36 120 100 0.3 30
30 75 100 0.4 40
39 130 100 0.3 30
105 25 100 1.041667 4%
31% 96 100.00

150 0.35 52.5

40 0.55 22
74.5

21589.25 3x =
1 2300
33.333% 2 2300
3 2300
4 2300
2.1x -2.7006 2.9988 5 2300
6 2300
3.36 2.24 7 2300
1.3 2.08 8 2300
1.26 2.1 9 2300
10 2300
2.38 -0.3
-0.12605
y x 1.0354 1.3 -0.2646
1.0354 -0.12605

4.57136 -1.15713

2300
13,915 696 - 14,611 46000 0.386087 17759.9903
14,611 731 - 15,342
15,342 767 - 16,109
16,109 805 - 16,914
16,914 846 - 17,760 0.783526 13,915.42
17,760 888 (2,300) 16,348
16,348 817 (2,300) 14,865
14,865 743 (2,300) 13,309
13,309 665 (2,300) 11,674
11,674 584 (2,300) 9,958
9,958 498 (2,300) 8,156
8,156 408 (2,300) 6,263
 6,263 313 (2,300) 4,277
4,277 214 (2,300) 2,190
2,190 110 (2,300) -

10,000,000,000
816,000,000 10,200,000,000

5.882%
0.952381 2,190.5
0.907029 2,086.2
0.863838 1,986.8
0.822702 1,892.2
0.783526 1,802.1
0.746215 1,716.3
0.710681 1,634.6
0.676839 1,556.7
0.644609 1,482.6
0.613913 1,412.0

17760.0 887.9995 -2300 16348.0

16348.0 817.3995 -2300 14865.4
14865.4 743.2695 -2300 13308.7
13308.7 665.4329 -2300 11674.1
11674.1 583.7046 -2300 9957.8
9957.8 497.8898 -2300 8155.7
8155.7 407.7843 -2300 6263.5
6263.5 313.1735 -2300 4276.6
4276.6 213.8322 -2300 2190.5
2190.5 109.5238 -2300 0.0
 29 30 31 32 33 34 35
Y0 1 2 3 4 5 6
PV 55000 55000 55000 55000 55000 55000
PV 568,854.10309 50,458.72 46,292.40 42,470.09 38,963.39 35,746.23 32,794.70

-65000 -65000
(122,596.154) (62,500.000) (60,096.154)

30 31 32 33 34 35
1 2 3 4 5 6
691,450.26 0 0

691,450.2569 = X 12.5206402 X 0.74378863

0.05
X= 55,224.8325
 36 37 38 39 40 41 42 43 44
7 8 9 10 11 12 13 14 15
55000 55000 55000 55000 55000 55000 55000 55000 55000
30,086.88 27,602.65 25,323.53 23,232.59 21,314.31 19,554.41 17,939.83 16,458.56 15,099.59

36 37 38 39 40 41 42 43 44
7 8 9 10 11 12 13 14 15

55000
611111.111 0.93085217 568854.103 10.3428019 55000
0.09
 45 46 47 48 49 50 51 52 53
16 17 18 19 20 21 22 23 24
55000 55000 55000 55000 55000 55000 55000 55000 55000
13,852.84 12,709.02 11,659.66 10,696.93 9,813.70 9,003.39 8,259.99 7,577.98 6,952.27

45 46 47 48 49 50 51 52 53
16 17 18 19 20 21 22 23 24
 54 55 56 57 58 59 60
25 26 27 28 29 30 31
55000 55000 55000 55000 55000 55000 55000
6,378.23 5,851.59 5,368.43 4,925.16 4,518.50 4,145.41 3,803.13

54 55 56 57 58 59 60
25 26 27 28 29 30 31
 1000 1100 1100 c
4% 4% 964.9122807018
25000 27500 24035.0877193 1.021121758

1.127474615638 1.125509 12.5509%

12.7475%

-0.92 -10.98 10000 1038.128906

10000 250 =
10250 256.25
10506.25 262.65625
10768.91 269.222656

1.010979 1.09789% 13.17% 1.00041264

1.001651581
1.001652 0.17%
1.004867551

1.03960396
895.83
81595.96 0.40792 33284.6027
 1.02 = (1+r12)^12
0.085 = 1+r12
= r12
0= r

1.103812891 10.381% 61 1 895.83 878.420

62 2 895.83 861.348
63 3 895.83 844.608
64 4 895.83 828.193
45186.70079 * 0.075466 65 5 895.83 812.097
66 6 895.83 796.314
3410.054947 67 7 895.83 780.838
48000 68 8 895.83 765.663
1.081625867243 69 9 895.83 750.782
0.00041264 1.9807% 70 10 895.83 736.191
0.001651581 1.9819% 71 11 895.83 721.883
72 12 895.83 707.853
1.0605 1.05 1.01 73 13 895.83 694.096
1.05 74 14 895.83 680.607
75 15 895.83 667.379
103.960% 3.960% 76 16 895.83 654.409
77 17 895.83 641.691
110000 78 18 895.83 629.219
2777500 0.788513 2,190,095.7883 79 19 895.83 616.991
80 20 895.83 605.000
21 895.83 593.242
22 895.83 581.712
23 895.83 570.407
24 895.83 559.321
25 895.83 548.451
26 895.83 537.792
27 895.83 527.340
28 895.83 517.091
29 895.83 507.041
30 895.83 497.187
31 895.83 487.524
32 895.83 478.049
33 895.83 468.759
34 895.83 459.648
35 895.83 450.715
36 895.83 441.956
37 895.83 433.366
38 895.83 424.944
39 895.83 416.685
40 895.83 408.587
41 895.83 400.646
42 895.83 392.860
43 895.83 385.225
44 895.83 377.738
45 895.83 370.397
46 895.83 363.198
47 895.83 356.139
48 895.83 349.218
27578.8178
 100
75.13148 100
96 1.041666666667 4% 100.00

100
1.130281 88.4736

Bond A Bond B Bond C Bond D Payoffs

Cah flow Year 0 (96.9) (99.0) (88.6) (99.5) 100.0
Year 1 100.0 2.8 - 3.0 -
Year 2 - 102.8 - 3.0 -
Year 3 - - 100.0 103.0 -

0.01 0.02 0.01 0.01

0.01 0.01 0.02 0.01
0.40 0.39 0.38 0.36
(0.39) (0.38) (0.36) (0.34)

Matrix A x Vector Col Q = Payoffs

Q = Payoffs x
 -0.006568 0.041051
0.041051 -0.006568

4.0 25 0.25 0.04

25.0 4 0.04 0.25

1.0 -
x = 1/x - 1.0

Matrix A^-1
 IRR
fv 100 Maturity 3 Y0 -110.98
Coupon rate 5.25% Coupon payment $ 5.25 Y1 $ 5.25
Present value -110.98 Y2 $ 5.25
1 year rate 1.10% FV $ 100.00 Y3 $ 105.25
2 year rate 1.15% 1.482%
3 year rate 1.50% YTM 1.482%
Rev 300000
Op 50000 250000 200000
Dep 50000 10000
Prof 200000 210000
Tax@20 40000
160000 210000
 COC 6%
Tax 40%

Year
0 1 2 3 4
Cost -20
Rev 25 25 25 25
Op exp 17.5 17.5 17.5 17.5
Dep 5 5 5 5

Profit (1-t) 4.5 4.5 4.5 4.5

Dep(t) 2 2 2 2

Cash flows after tax -20 6.5 6.5 6.5 6.5

NPV 2.5232

1 2 3 4
Accounts
$50 $65 $70 $75
Receivable
Inventory $30 $10 $45 $30
Accounts
$30 $30 $50 $55
Payable

$50 $45 $65 $50

Chng 50 ($5) $20 ($15)

-50 5 -20 15

Year
0 1 2 3 4
-40 0 15 10 10
-40 0 11.34216 6.575162 5.717532
 5 6
10 10
4.971767 4.323276 -7.070107
 DV IRR Guess 17.6194%
CF 33
Year CF
0 -180 NPV 7.079E-07
1 33
2 33
3 33
4 33
5 33
6 33
7 33
8 33
9 33
10 33
11 33
12 33
13 33
14 33
15 33
16 33
17 33
18 33
19 33
20 33
18%
 8.6667% 11.000%
Y0 y1
-600 52 -600
600.001 -100
0.000995 0.000
371.4286 -228.5714 0.7
0.000995
0.3809524 0.3
1.00 2.00
-228.5714 -30
2 1
 100 = 97.0139
(1+r) 1.03078 4.5
3.0780% 4.3656255

100.5226 96.1569745 =

1.086764642
1.042480044

Coupon rate 0 2.25% 3.43% 0%

FV 100 100 100 100
1 Year STRIPS 2 Year T Note 3 Year T Note 3 Year Strips
Pay off Y0 -96.8617 -99.0684 -105.5209 -94.1215
Y1 100 2.248 3.43 0
Y2 0 102.248 3.43 0
Y3 0 0 103.43 100

Matrix A * X

0.020987387 0.03032874 0.019667943 0.019753643

0.020987387 0.02032874 0.029667943 0.019753643
-0.625632172 -0.605997957 -0.592853599 -0.58885438
0.647091355 0.626783687 0.613188478 0.61905209

2.098738703
2.098738703
-62.56321717
64.70913552

-203.2873986 -207.9186853 6601.726983 -6090.5209

 104.5
(1+r)^2

4.2480%

100
0
0
0

= P

= P * Matrix A ^-1

100
0
0
0

100
FV 100
CR 7% Y1 6.557746 8
CF 7 Y2 6.143433 7.739189
YTM 6.74% Y3 87.9738

100.6750

FV 100.00 Year 2.00 -100.46

CR 7% Y1CF 6.628085 7.00
CF 7.00 Y2CF 93.83642 107.00
YTM ? PV -100.46 6.7440%
SR1 5.61%
SR2 6.78% 6.9920%
29.673590504451

30.6736
CR 4.25%
FV 100
CF 4.25
SR 3.37%

Year
PV Weighted cfs PVWCFS
1 4.25 4.111444 4.25 4.111444
2 4.25 3.977406 8.5 7.954812
3 4.25 3.847737 12.75 11.54321
4 4.25 3.722296 17 14.88918
5 104.25 88.32903 521.25 441.6452
103.9879 480.1438 Macualy duration

Modified
PVWCFS/price 4.617304

4.4667736850243
 CR 2.75%
FV 100

YTM 8% Yr CF
Pension liabilities 1 2.25% 2.75
Yr Millions Weighted CFS 2 2.57% 2.75
9 21.2 190.8 3 2.84% 2.75
25 34.1 852.5 4 3.05% 2.75
5 3.23% 102.75
PV 15.58449 219.9278

Macualay 14.11197 Price elasticity Change 4.716213

Modified 13.06663 102.6463

Intrest rate change 0.30%

Change in liability 0.61091

Yr CF
1 1.20% 2.75
2 1.52% 2.75
3 1.79% 2.75
4 2.00% 2.75
5 2.18% 102.75

Change 5.008977
107.7999

cr 5.50%
FV 100
YTM 6.30%

Yr CF PVCF
1 5.5 5.174036
2 5.5 4.86739
3 105.5 87.83198

97.8734

Yr CF PVCF
1 5.5 5.174036
 2 5.5 4.86739
3 105.5 87.83198

97.8734

Yr CF PVCF
1 5.5 5.073801
2 5.5 5.461464
3 105.5 105.4375

115.9728
pv t*cf
2.6895391596902 2.75 2.630408
2.6137907242473 5.5 5.096475
2.5282344889407 8.25 7.375082
2.4382979067085 11 9.46423
87.660244796809 513.75 424.5969
97.930107076395 449.1631 -4.586568

pv t*cf
2.7174450087946 2.75 2.685275
2.6681367598927 5.5 5.256247
2.6072814315715 8.25 7.684122
2.5402561293316 11 9.961476
92.257852845569 513.75 451.4583
102.79097 477.0454 -4.640927

4.86087

WCF WPVCF t+2 t*(t+1) [PVcf*t*(t+[1/2*1/p*(1/(1+r)^2)]

5.5 5.174036 3 2 10.34807 0.004521
11 9.73478 4 6 29.20434
316.5 263.4959 5 12 1053.984
1093.536
Convexity [PVcf*t*(t+1)]*[1/2*1/p*(1/(1+r)^2)]
278.4048
Mcd 2.844539 0 4.943926
Mod 2.675954

t*cf (1+r)^t+1
5.5 4.86739
 11 9.157837
316.5 247.8795

261.9048 2.675954

First order apprxo 5.5 this is negative

92.3734

Second order p*(convexity*delta rate^2)

0.213391 wheras this is positive
change in price 92.5868

8.40%
t*cf (1+r)^t+1
5.0738007380074 5.5 4.86739
4.6806279870917 11 9.157837
82.825604266718 316.5 247.8795

92.580032991817
11.24 12.248228 8.99 10.583927 12.4604573 13.99683
669.30207650273 236.433
66.00612194307 10.583927 248.893424
165.697106 7.602537 7.56910512 150.525464
186.94683

0 1 2 3
Expected Earnings per
$26.50 $26.50 $26.50
Share
Plow-Back Ratio 0.88 0.54 0

Payout 0.12 0.46 1

Book Value per Share $100

1 2 3
Earning per share $26.50 $31.1640 $33.69
Cash Flow's $3.18 $14.34 $33.69
Investment $23.32 $16.83 $0.00
BVPS $100 $ 123.32 303.513514
Ex div price @ Y2 $303.4981
Ex div price @ Y0 $260.3589 $2.8623 $257.4966
$286.0788
11.1000%
$231.77
$289.26
$286.08
SDE
COC 12.20%
T=0 T=1 T=2 T=3
Expected earnings 5.8 6.04 6.30
Payout ration 79% 79% 79%
Plowback ratio 21% 21% 21%
Dividend 4.5820 4.7744 4.9750
Dividend growth rate 4.200% 4.200%

P0 57.275

PVGO= P0-(EPS1/R)
PVGO= 9.734016

DCL

Division A Division B
FCF 1.686 3.24
Growth 1.18% 2.03%

Int rate 3.06%

Total Mkt Cap of DC 120

Divison A 89.77636
Divison B 30.22364 = 3.24
(R-2.03%)
0.107201
COC of Division B 12.7481%

Y0 Y1 Y2
-6.948 1.0782
10.05776
3.109756
2.758146
122.7581
 Time 0 1 2 3 4
Book Value 10 13 15.5 16.55 17.61
Earnings -3 0.5 2.5 4

Net Investment 3 2.5 1.31 0.8

Free Cash Flow -6 -2 1.19 3.2

Disc rate 11.82%

Mrkt value to Book
Multiple 24.654
-6 -2 1.19 27.854
11.7018 -5.365766 -1.599525 0.851115 17.81598
 A B
120 80 PO 120 80 150
2.07918125 1.90309 U(Logx) 2.079181 1.90309 2.176091
1.03959062 0.951545 1.03959 0.95154 1.08805
1.99113562 1.99114 1.93753
2.00000000

A B
PO 89.92 141.84
Pr0b 0.43 0.57
U(X=X) 38.6656 80.8488
119.5144
U(Logx) 1.953856 2.151799
0.840158 1.226525
u(ce) = 2.066683
ce = 7.898584

4.49892 4.9547
1.934536 2.824179
4.758715
116.596

4.49892 1 2.718282
 50
1.69897
0.84949

1 -0.25 1.562 1.2498 0.6249

0.5 0.438 0.661816 0.330908
-0.5 0.955808
0.913569
8.643%

risk premium
E[u(w(1+x))] = u(w(1-pie)

E[U(w(1+x))] = for utility u(x)=lnx

1/2*u(1*(1+56.2%)+1/2*u(1*(1-56.2%)

0.222984
-0.412768
-0.189785 = u(w(1-pie)

= ln(1-pie)

1-pie = 0.827137

pie 0.172863
17.2863%
 u(w(1-pie)

tility u(x)=lnx

1/2*u(1*(1-56.2%)

u(w(1-pie)
 Inv
leverage
Porfolio A Weights Porfolio B Weights Porfolio c Weights
Inv
X 112.4 34.2266% 295.5 40.0244% 407.9 38.2394% loan
Y 216 65.7734% 202.8 27.4685% 418.8 39.2613% net
RF 0.0000% 240 32.5071% 240 22.4993%
328.4 100.0000% 738.3 100.0000% 1066.7 100.0000%

Expected Standard
Stock Return (in Deviation (in
%) %)
ABC 22 0.16
XYZ 12 0.3

Portfolio Weights
ABC 0.86
XYZ 0.14

E® 20.6000

0.0183861
13.560%
-10%
5 -0.5

500 450
-400
100 50%
 1.96

0.03177
0.18

3.61
0.005184

0.010609
0.018714
0.029323
0.17 0.01
45.17878% 0.0550
0.07000

0.00005445
0.73790%

0.00002178
0.46669%
 1 0.055 1 0.07
2 0.055 2 0.07
3 0.055 3 0.07
4 0.055 4 0.07
5 0.055 5 0.07
6 0.055 6 0.07
7 0.055 7 0.07
8 0.055 8 0.07
9 0.055 9 0.07
10 0.055 10 0.07
11 0.055 11 0.07
12 0.055 12 0.07
13 0.055 13 0.07
14 0.055 14 0.07
15 0.055 15 0.07
16 0.055 16 0.07
17 0.055 17 0.07
18 0.055 18 0.07
19 0.055 19 0.07
20 0.055 20 0.07
1.1000 1.4000
portf ER Loading f1 Amt
A 7.60% 1.1 xa
B 5.60% 3.4 xb
RF 1.40% 0 xc

-1 -1 -1 100
1.076 1.056 1.014 0
1.1 3.4 0 0

20.94532 20.65614 -0.25516403

-6.776428 -6.682868 0.376670717
-15.16889 -13.97327 -0.12150668

a 2094.5322
b -677.6428
rf -1516.8894

1 1 1 38%
2 0.5 1 37.45%
0.5 2 1 55.15%

-2 1.333333333 0.666667
-2 0.666666667 1.333333
5 -2 -2

10.700%
22.500%
4.800%
 1
0.0000101 1000 99,008,901
0.0000808 9900890% 10000 990,089,010
700% 0.9999899 10,000,000
1 700%
9,900,990.10
8000