Equity Formulas

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Gordon Growth Model Equity risk premium estimate

(1 year forecasted dividend yield on market index)+(consensus long-term earnings growth rate)-(long term government bond yield)

Blume adjusted beta

(2/3 * regression beta)+(1/3*1)

trailing D/P

(4 x most recent quarterly dividend/(market price per share)

FCFF from EBIT

(EBIT x (1-tr))+Dep-FCinv-WCInv

FCFF from EBITDA

(EBITDA x (1-tr))+(Dep x tax)- FCInv-WCInv

Leading D/P

(forecasted dividends over the next four quarters)/Market price per share

earnings retention rate

=1-dividend payout ratio

Holding Period Return

CF@1 is often D@1

FCFF from CFO

CFO + (Int x (1-tr))-FCInv

FCFE from CFO

CFO - FCINv + Net borrowing

FCinv

Capex - proceeds from sales of long-term assets

BV of equity

Common shareholder's equity = TA-TL-Pref stock

ibbotson-chen

EINFL -est inflation EGRPS- Exp g in real earnings per share EGPE - exp g P/e EINC - Expected income componenet (dividend yield or income)

Leading P/E

Market price per share/ Forecasted EPS over next 12 months

trailing P/E

Market price per share/EPS over prev 12 months

FCFE from NI

NI + NCC - FCInv - WCInv + Net borrowing

Forecasting FCFE

NI - [(1 - DR) x (FCinv - Dep)] - [(1 - DR) x WCinv] DR = Target debt to asset ratio

CF formula from NI

NI+NCC (dep, amort)

FCFF from NI

NI+NCC+(Int*(1-tax))+Dep-FCInv-WCInv

ROIC

NOPLAT/Invested capital

NOPLAT stands for

Net operating profit less adjusted taxes. (earnings before interest, available to provide a return to equity and debt holders)

method of average ROE for normalized earnings

Normalized EPS = avg ROE x Current BVPS

ROCE

Operating profit/capital employed

PEG ratio

PE TO G

Levered and unlevered beta

UL=(1/1+D/E)*B of benchmark Lev=(1+D/E)*Bul Only difference is dividing by 1. You UL, then multiply by UL to get to target beta

Perceived mispricing with intrinsic value

Ve-P=(V-P) + (Ve-V). Est value - price = (intrinsic value - price)+(estimated value- price). Sum of misspricing and the error of intrinsic value estimate

pastor stambaugh

adds liquidity to fama french

terminal ddm for two stage cash flows

calculate the terminal value using the DDM, then use the calculator to discount it all in CF

justified trailing p/e. 3 formulas

can also be derived from leading P/E = Leading P/E x 1+g

p/e multiple leading

leading p/e x forecasted earnings in year n+1

Price to cash flow

market price of equity (per share)/Cash flow (per share). Cash flow can be CF, adjusted CFO, FCFF, or EBITDA

In ROIC, invested capital is defined as

operating assets - operating liab

PVGO

present value of growth opportunities

fama french

splits up betas and premium by factors, extended capm

h model in terms of r

study this, it's just a rewritten form of the normal h model, you might not need to memorize

Sustainable Growth Rate with ROE (the big long PRAT, and the short one)

this is a blown out b x ROE (b=retention rate) Profit margin, Retention ratio, Asset turnover, financial leverage

p/e multiple terminal value trailing

traling P/e x earnings in year n

FCInv if no long term assets sold

Ending net PP&A - Beginning net PP&E + Depreciation

cannibalization formula for products

Expected number x % representation X % cannibilization

Firm value with free cash flow - Equity value

FCFE discounted at required return on equity

Firm value with cash flow models - Firm Value

FCFF discounted at WACC

FCFE FROM FCFF

FCFF-int(1-TR)+Net borrowing The difference is removing interest net of tax, adding in net borrowing

Portion of firms leading PE related to PVGO

Find P/E, then find P(VGO)/E, divide P/E by PVGO/E


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