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CFA - Corporate Finance
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Degree of Financial Leverage
(DFL)
% Change EPS
% Change EBIT
Or
EBIT
EBIT - Interest
Economic Profit
NOPAT - $WACC
NOPAT = EBIT(1-T)
$WACC = (Initial Outlay- Depreciation) * WACC
Degree of Operating Leverage
% Change EBIT / % Change Sales
or
Q(P-V) / Q(P-V)-F
Economic Income
Aftertax CF + (EOP MV - BOP MV)
Aftertax CF = EBIT(1-T) + Depreciation
Breakeven Quantity Sales
Fixed Cost / (Price - Variable Cost per unit)
Degree of Total Leverage
DOL * DFL
Cash Flow (Replacement Project Analysis)
(Change Sales - Change Cost)(1-T) + Change DT
Initial Outlay (Replacement Project Analysis)
Outlay = FCInv + NWCInv - Sale + T(Sal - Book)
Sal = Cash proceeds of fixed asset to be replaced
Book = Book value of fixed asset to be replace
Terminal Year After Tax Non Operating Cash Flow(TNOCF)
Sal + NWCInv - T(Sale - Book)
Sal = Pretax cash proceeds of fixed asset to be replaced
Book = Book value of fixed asset to be replace
After tax Operating Cash Flow
(S - C - D)(1 - T) + D
or
(S - C)(1 - T) + TD
S = Sales
C = Cash operating costs
D = Depreciation expense
T = Marginal tax rate
Net Working Capital Investment
(NWCInv)
Change non cash current assets - Change non debt current liabilities
Initial Outlay
FCInv + NWCInv
Residual Income
NI - Equity Charge
Equity Charge = (Required Return On Equity) * (BOP Book Value of Equity)
Expected Dividend
Previous Dividend + Expected increase EPS * Target payout ratio * Adjustment factor
Herfindahl Hirschman index
(HHI)
Sum i = 1 to n of (MS * 100)
2
MS = Market share of firm
n = # firms in industry
<1000 industry is competitive
1000 - 1800 industry moderately competitive
>1800 industry not competitive
Market Value Added
(MVA)
Sum t=1 to infinity of EP / (1 + WACC)
t
EP = Economic Profit
Post Merger Value
V
AT
= V
A
+ V
T
+ S - C
V
A
= Premerger value of acquirer
V
T
= Premerger value of target
S = Synergies created
C = Cash paid to targets
Take Over Premium
(Deal Price/Share - Target's Stock Price)
Target's Stock Price
Balance Sheet Based Accruals Ratio
(NOA
end
- NOA
beg
)
(NOA
end
+ NOA
beg
) / 2
Cash Flow Based Accurals Ratio
(NI - CFO - CFI)
(NOA
end
+ NOA
beg
)/2
Core Operating Margin
Sales - COGS - SG&A
Sales
Gain to Target
P
T
- V
T
Gain to Acquirer
S - (P
T
- V
T
)
Net Operating Assets (NOA)
(Total Assets - Cash) - (Total Liabilities - Total Debt)
Author
SpeedRacer
ID
12019
Card Set
CFA - Corporate Finance
Description
CFA Level 2 flashcards
Updated
2010-05-01T21:47:33Z
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