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Effective Interest Rate (non-compounded). This is also known as...
- aka APR
- finance charges / proceeds
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APR (compounded rate)
- ([1+(i/n)]^nt) -1, where
- i = interest rate per period, n=number of periods per year, t=total number of payments
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Total interest paid using Simple Interest formula
- SI = P(i)(n), where
- P = original principal (not the effective proceeds)
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Future Value Factor
(1+r)^n
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Weighted Avg Interest Rate
effective annual interest payments / debt outstanding
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After-tax Cost of Debt
pretax cost of debt x (1-tax rate)
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Cost of preferred stock
preferred stock dividends / net proceeds of preferred stock
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Cost of retained earnings: CAPM
- risk-free rate + risk premium OR
- risk-free rate + (beta x market risk premium) OR
- risk-free rate + (beta x (market rate – risk-free rate))
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Cost of retained earnings: discounted cash flow
- D / P + g, where
- D = dividend expected at end of year, P=price of stock, g=growth rate
- If “g” not provided (1-payout rate) x ROE, or (retention rate x ROE)
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Cost of retained earnings: bond yield plus risk premium
- pretax cost of long term debt + market risk premium, OR
- bond yield + market risk premium
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ROI: simple formula
- net income / invested capital, OR
- net profit margin x investment turnover
- net income/sales x sales/invested capital
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ROA
- net income / avg assets, OR
- net profit margin x asset turnover, OR
- net income/sales x sales/avg assets
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ROE
net income / avg equity
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ROE: Dupont Formula
- net margin x asset turnover x financial leverage, OR
- (net income/sales) x (sales/avg assets) x (avg assets/avg equity)
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ROE: Extended Dupont Formula
- operating margin x interest burden x tax burden x asset turnover x financial leverage
- (EBIT / sales) x (pretax income/EBIT) x (net income/pretax income) x (sales/avg assets) x (avg assets/avg equity)
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Debt-to-total-capital ratio
total debt / total capital
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Debt-to-equity ratio
total debt / total shareholders equity
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Times interest earned ratio
EBIT / interest expense
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Degree of Operating Leverage
- DOL = % change in sales / % chg in EBIT OR
- Quantity(Sales Price-Variable Cost) / Quantity(Sales Price-Variable Cost)-Fixed Cost OR
- Fixed Cost / (Contribution Margin-Fixed Cost) OR
- Total Fixed Costs / Total Variable Costs
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Degree of Financial Leverage
- DFL = % change in EPS / % chg in EBIT, OR
- DFL = EBIT / (EBIT - Interest)
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