CPA Review BEC - Becker B3

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  1. Working Capital Financing
    Short-term method of financing where current assets are financed with trade accounts receivable & accrued liabilities
  2. Letter of Credit
    A third party guarantee
  3. Line of Credit
    Revolving line of short-term borrowing with a financial institution
  4. Operating Lease
    Long-term financing option referred to as "off balance sheet financing". It is a pure rental agreement, no change of ownership
  5. Capital Lease
    Long-term financing option, where lesee can rent to own by recording both an asset and a liability
  6. Bonds & Debentures
    Long-term financing option which is a form of indebtness whereas the borrower is to pay a rate
  7. Preferred Stock
    Long-term financing option where the stock is preferred in terms of liquidations & dividends, no voting rights
  8. Common Stock
    Long-term financing option which is basic ownership in a company
  9. Depreciation Tax Shield Formula
    Depreciation Expense x Tax Rate
  10. After-tax Cost of Debt Formula (kdx)
    Kdt x (1-Tax Rate)

    Kdt = Cost of Debt
  11. Cost of Perferred Stock Formula (kps)
    Dps / Nps

    • Dps = PS Cash Dividends
    • Nps = PS Proceeds - Float Costs
  12. Cost of Common Stock Formula (kre)
    (D1 / P0) + g

    • D1 = Expected Dividend
    • P0 = Current Stock Price
    • g = Constant Dividend Growth Rate
  13. CAPM Cost of Retained Earnings Formula (kre)
    krf + (bi x PMR)

    • krf = Risk-free Rate
    • bi = Beta Coefficient
    • PMR = Risk Premium (Market Rate - Risk-free Rate)
  14. Weighted Average Cost of Capital (WACC)
    (kre x %kre) + (kdt x %kdt)

    • kre = Cost of Equity
    • kdt = Cost of Debt
  15. Discounted Cash Flow Formula (DCF)
  16. Discounted Cash Flow for NPV Steps
    • 1. Calculate After Tax Inflows: Annual Cash Inflows x (1-Tax Rate)
    • 2. Add Depreciation Benefit: Depreciation x Tax Rate
    • 3. Multiply Result by PV of Annuity
    • 4. Subtract Initial Outflow
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CPA Review BEC - Becker B3
2011-08-08 12:10:55
CPA Becker BEC B3

Becker CPA Review BEC B3
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