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Formula Sheet PDF

The document provides key financial formulas and models, including Modigliani and Miller Proposition 2 with tax, the Capital Asset Pricing Model, and the Weighted Average Cost of Capital. It also covers asset beta calculations, the Growth Model, Fisher formula, and the Black-Scholes option pricing model. These formulas are essential for understanding corporate finance and investment valuation.

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Eshal Khan
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19 views1 page

Formula Sheet PDF

The document provides key financial formulas and models, including Modigliani and Miller Proposition 2 with tax, the Capital Asset Pricing Model, and the Weighted Average Cost of Capital. It also covers asset beta calculations, the Growth Model, Fisher formula, and the Black-Scholes option pricing model. These formulas are essential for understanding corporate finance and investment valuation.

Uploaded by

Eshal Khan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

FORMULAE AND TABLES

Modigliani and Miller Proposition 2 (with tax)


Vd
ke = kie + (1 − T)(kie − kd)
Ve
Or rearranged
Vd V
ke + (1 − T) kd = kie + (1 − T) kie d
Ve Ve

The Capital Asset Pricing Model


E(ri) = Rf + i(E(rm) − Rf)

The asset beta formula


 Ve   Vd (1 – T) 
a =  βe  +  βd 
 (Ve + Vd (1 – T))   (Ve + Vd (1 – T)) 
The Growth Model
Do (1  g)
Po 
(re – g)
Gordon’s growth approximation
g = bre
The weighted average cost of capital
 Ve   Vd 
WACC =   ke +   k d (1 – T )
 Ve + Vd   Ve + Vd 
The Fisher formula
(1 + i) = (1 + r) (1 + h)
Purchasing power parity and interest rate parity
(1+ hc ) (1+ ic )
S1 = S o x F0 = S o x
(1+ hb ) (1+ ib )
Modified Internal Rate of Return
1

PV  n
MIRR =  R  (1  re) – 1
 PVI 
The Black-Scholes option pricing model
c = PaN(d1) – PeN(d2)e−rt

KAPLAN PUBLISHING P.31

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