No of shares

it]
-ra)
.

Sm2 ri+
outstanding
:

MRP
↳
total market value of a firm's NixPi
outstanding shares MUi =
:

↑
price of i per share
value
weighted portfolio :

Market value of i
xi =

Total market value of all securities = ;

Market risk premium

:

rmat-g
=>
Dividend yield +

expected dividend
growth rate
Expected retur of a bond :

rd = (1 -

p)y p(y-L)
+

y - pL
=

-Yield to Maturity prob (default) -

~ Expected loss rate .

Asset or Unlevered Cost of Capital : ro =

EEDTE ED +

Asset or Intevered beta :

u= FEDE D

Net Debt =

Debt -

Excess Cash and short term investments

Effective after-tax interest rate =

r (1 -

Tc)
WACC :
TwAcc =

EDE pra(l-Te) given target

+

fevarge ratio :

Traca =

Po- Tc
 Mr of in unleverd fir
equity
an
~

MM proposition/states that E +D U A
= =

TMU of firms asset

Leverage and Equity Cost of Capital :

Rr=DRE + Ro
↑
Risk wo leverage
RE Ru+1 (Ro-RD) Additional risk due

~
=

E to
- leverage
r

Leverage and Equity Belas :

Bu =

E +Do

Be Bu =
+

(Bu Bp) -

Fernings
Earnings per share (EPS) wrof
Shares
=

Earnings =
EBIT -

Interest

Interest Tax Shield =

Corporate Tax Rate = Interest Payments

CF to Investors =
CF to Investors -
Interest tax shield
with
leverage wo leverage

V =
v"+ PV /Interest Tax Shield)
- ↓ value intevered
I value levered
MAt =

Pix Total No .

of Shares
valuing interest tax shield wo risk :

PU (Interest Tax Shield) =

Interest tax shield -

(I-fralm)
valuing interest tax shield with permanent debt :

raD
interest
-

PV ( Interest tax shield)

:

rf

=
Tc xD

Market Value of Debt =D =

Payments)
PV (Future Interest

WACC with taxes :

NWACC= - rE+ Epp(1-1)

Total value of levered fir :

v v"
=
+
TcD

value of equity :
E =

V-D
(Prob outcome x outomel) (proborkomex outcome2)
+

NDV=- Initial investment +

(1 cost of capital)
+

PV =

c = + (1 -

r)r)
Perpetual debt :
PV (Interest for shield) =

Sig-r-g)
=V-vu

RWAC =

EDR= Er +

Roll-Te)