Question

Hi all,

can someone please post formulas used for corporate finance course. thank you!

Answer 1

The following are formulas that are generally used for any corporate finance course.
Present Value = Future value/ ((1+r)^t)
where r is the interest rate and t is the time period
Future Value = Present Value*((1+r)^t)
where r is the interest rate and t is the time period
Future Value = C*[(1+(r/m))^mt]
where C is the present value
r is the interest rate
t is the year
m is the compounding period
Present Value = Future value/[(1+(r/m))^mt]
r is the interest rate
t is the year
m is the compounding period
Present value of a perpetuity = C/r
Present value of an annuity = C[(1-(1/(1+r)^t))/r]
where C is the annuity payment
r is the interest rate
t is the year
Future value of an annuity = C[((1+r)^t-1)/r]
where C is the annuity payment
r is the interest rate
t is the year
expected return on a portfolio = XaRa + XbRb
where Xa and Xb are the proportions of the total portfolio in assets A&B
Ra and Rb are the expected returns on the two securities
Variance of portfolio
Xa^2(STDRa)^2 + Xb^2(STDRb)^2 + 2XaXbCORR(Ra,Rb)STD RaSTDRb
where Xa and Xb are the proportions of the total portfolio in assets A&B
STDRa = standard deviation of return on security A.
STDRb = standard deviation of return on security B.
CORR(Ra,Rb) = Correlation between the returns of security A and security B.
Beta of security I = Cov (Ri,Rm)/Var(Rm)
where Ri is the return on the security I.
Rm is the return on the market.
Cov (Ri,Rm) = Covariance between Ri and Rm.
Var(Rm) = Variance for Rm.
Weighted average cost of capital = [(S/S+B)*Rs + (B/S+B)*Rb(1-tc)]
	S = equity, B = debt, Rs = Cost of equity, Rb = cost of debt,
	tc = corporations tax rate
Under the Capital Asset pricing model
Rs = Rf + Beta*(Rm-Rf)
Rs is the expected return on the security
where Rf is the risk free rate, Rm - Rf = difference between the expected return on the market
portfolio and the riskfree rate.