# test 3 formulas

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The flashcards below were created by user wsrdpc on FreezingBlue Flashcards.

1. 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
2. yield to maturity formula
to use calculator look to find yield
3. preferred stock formula
• P=D/K
• P is price
• D is divident
• K is rate of return
4. common stock
• P=D/(k-g)
• p is price
• d is dividend
• k is rate of return
• g is growth rate
5. 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 %
6. cost of debt - Yield to maturity after tax
Yield to Maturity X (1-tax rate)
7. cost of new preferred stock
• K = D/(P-F)
• K is rate of return
• P is price
• D is dividend
• F is flotation cost
8. 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
9. Payback of debt
• is the number of years to get back cost
• if part of a year left needed/total payback for year
10. 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})
11. 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})
12. NPV w/ PI
(NPV + outlay)/outlay

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 Author: wsrdpc ID: 85951 Filename: test 3 formulas Updated: 2011-05-15 19:34:18 Tags: test formulas Folders: Description: test 3 formulas Show Answers:

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