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Real GDP
(Nominal GDP / GDP deflator) x 100
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Unemployment Rate
(Number of unemployed / total labor force) x 100
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Inflation Rate
- (CPI1 – CPI0 / CPI0) x 100, where
- CPI1 = this period, CPI0=last period
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CPI
(Current cost of market basket / base year cost of market basket) x100
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Real interest rate
nominal interest rate – inflation rate
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Price Elasticity of Demand
% Change in quantity demanded / % change in price
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Price elasticity of supply
- % change in quantity supplied / % change in price
- (new quantity-old quantity)/((new+old)/2) / (new price-old price)/((new+old)/2)
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Cross elasticity of demand
- % change in number of units of X demanded / % change in price of Y
- (new quantity-old quantity)/((new+old)/2) / (new price-old price)/((new+old)/2)
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What are the three Present Value Factors?
- If no growth: 1/(1+r)^n
- If constant growth: 1/(r-g), where g=growth rate calculated as [retention rate x ROI] OR (1-payout rate) x ROI
- If variable growth: FCF x (1+g)^n / (1+r)^n
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Present Value of an Annuity Factor
[1 - (1 / (1 + r) ^ n)] / r
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Stock value (price) per Share Using Dividend Method w/o Growth
- P = D/R, where
- P=stock price, D=dividend, R=REQUIRED RETURN (not rate)
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Stock value (price) per Share Using Dividend Method w/ Growth
- Current share price = dividend amount in 1 year / (required return - growth rate).
- Dividend amount in 1 year would be current dividend x (1+growth rate).
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Price to earnings; modified to value (price) a stock
- P/E = Current price / EPS, where EPS is typically derived from the earnings projected over the next 4 quarters [aka Forward EPS] or previous 4 quarters [aka Trailing EPS].
- To value a stock, find the P/E of a similar company, then use the EPS of the current company as follows...
- PE (of competitor) * EPS (of this company) = the price this company's stock should be trading at.
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PEG (price to earnings growth); modified to value a stock
- P/E/G = Current price / (current EPS x (1+growth rate)) / (growth rate x 100), where EPS is typically Forward EPS which is why it's current EPS x (1+growth rate).
- To value a stock, find the P/E/G of a similar company, then use the EPS of the current company as follows...
- PEG (of competitor) * EPS (of this company) * (growth rate x 100) = the price this company's stock should be trading at.
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Price-to-Sales Ratio; modified to value a stock
- P/S = Current price / expected sales in 1 yr.
- To value a stock, find the P/S of a similar company, then use the expected sales of the current company as follows...
- P/S (of competitor) * sales (of this company) = the price this company's stock should be trading at.
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Price-to-Book Ratio; modified to value a stock
- P/B = Current price / book value of common equity.
- To value a stock, find the P/B of a similar company, then use the BV of common equity of the current company as follows...
- P/B (of competitor) * BV = the price this company's stock should be trading at.
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