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Value of a bond
- PV of Principal + PV of interest
- can use TVoM on calculator all at once entering years, yield, interest payments, principal on bond solve for PV
- if semi annual years is x2, yield and interest payments are /2
-
yield to maturity formula
to use calculator look to find yield
-
preferred stock formula
- P=D/K
- P is price
- D is divident
- K is rate of return
-
common stock
- P=D/(k-g)
- p is price
- d is dividend
- k is rate of return
- g is growth rate
-
cost of debt - estimated Yield to Maturity
- interest + [(principal-price)/#years]
- divided by
- .6(bond price)+.4(principal payment)
multiply answer by 100 to get %
-
cost of debt - Yield to maturity after tax
Yield to Maturity X (1-tax rate)
-
cost of new preferred stock
- K = D/(P-F)
- K is rate of return
- P is price
- D is dividend
- F is flotation cost
-
cost of new common equity
- K = [D/(P-F)]+g
- K is rate of return
- P is price
- D is dividend
- F is flotation cost
- g is growth rate
-
Payback of debt
- is the number of years to get back cost
- if part of a year left needed/total payback for year
-
NPV
- is the sum of the PV of each cash inflow minus the cash outflow (initial investment)
- or
- use NPV on calculator
- NPV(rate,-outlay,{inflows}{inflow counts})
-
IRR
- when NPV is equal to 0 so if
- NPV is positive raise the rate
- if NPV is negative lower the rate
- or
- calculator IRR (-outlay,{cash inflows}, {inflow counts})
-
NPV w/ PI
(NPV + outlay)/outlay
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