Corporate Finance Basics

Formula Quick Reference

FORMULA FOR CAPM:

R(rs)= rf + Bs [E(rm)-rf]

FORMULA FOR DIVIDEND VALUATION:

V= D1 / {R(r)-gn}

FORMULA FOR NPV:

NPV= -II + (sum of) [OCF/ (1+R(r))t] + [TCF/(1+R(r))n]

FORMULA FOR IRR:

II=(sum of) OCFt/(1+IRR)t+ TCFn/(1+IRR)n

RATIO FOR PROFITABILITY INDEX:

present value of future cash flow/ initial investment

FORMULA FOR FINDING PRESENT VALUE OF A SINGLE CASH FLOW WITH COMPOUND INTERST:

PV0=FVn(1+r)-n

FORMULA FOR FINDING FUTURE VALUE OF A SINGLE CASH FLOW WITH SIMPLE INTEREST:

FVsn=PV0(1+nr)

FORMULA FOR FINDING FUTURE VALUE OF A SINGLE CASH FLOW WITH COMPOUND INTEREST:

FVn=PV0(1+r)n

FORMULA FOR FINDING WACC:

Wd(Kd)(1-t)+(Wpfd)(Kpfd) +(We)(Ke)

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This website was created in May 1999 by Alison Hirsch '01, and is maintained by Professor Satya Gabriel, of the Economics Department at Mount Holyoke College