Corporate Finance Basics

Formula Quick Reference

FORMULA FOR CAPM:

R(r_s)= r_f + B_s [E(r_m)-r_f]

FORMULA FOR DIVIDEND VALUATION:

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

FORMULA FOR NPV:

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

FORMULA FOR IRR:

II=(sum of) OCF_t/(1+IRR)^t+ TCF_n/(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=FV_n(1+r)^-n

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

FV^s_n=PV₀(1+nr)

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

FV_n=PV₀(1+r)ⁿ

FORMULA FOR FINDING WACC:

W_d(K_d)(1-t)+(W_pfd)(K_pfd) +(W_e)(K_e)

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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