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13 Cards in this Set
- Front
- Back
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NOPAT |
net operating profit after tax = (EBITDA - Depreciation) (1 - T) = EBIT (1 - T) = (Sales - COGS - SGA - Dep) (1 - T) |
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EVA |
economic value added = NOPAT - (WACC x invested capital) = [EBIT (1 - T)] - WACC |
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Residual Income |
= E - (re x Bt-1) = (ROE - re) x Bt-1 OR = EBIT(1 - T) - (WACC x (equity + debt)t-1) |
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Continuing residual income and persistence factor |
= RIt / (1 + r - w) if w = 1, RI persists at current level forever if w = 0. RI drops to zero next year |
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Clean surplus relation and items that violate this |
Bt = Bt-1 + Et - Dividendst Violations: 1. FCY transalations under all-current method 2. Minimum liability adjustment in pension accounting 3. Change in MKV of debt & equity securities classified as AFS |
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justified trailing P/E justified leading P/E fundamental justified P/E |
trailing = (1 - b)(1 + g) / (r - g) leading = (1 - b) / (r - g) fundamental justified = 1 / [real rate + (1 - pass through) x inflation] |
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P/B |
(ROE - g) / (r - g) |
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P/S |
= (E/S) x [(1 - b)(1 + g) / (r - g)] = net profit margin x justified trailing P/E |
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Enterprise value |
MKV common stock + MKV debt + MKV preferred equity + minority interest - cash and investments |
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RI valuation |
B0 + PV of future RI for a period + PV of terminal value |
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Multifactor models to determine required return |
1. Fama-French: market risk, small cap, value 2. Pastor-Stambaugh: FF + liquidity 3. Burmeister Roll and Ross: incorporate 5 risks: confidence, time horizon, inflation, business cycle, market timing 4. Build-up: for closely held companies where betas not readily available required return = Rf + ERP + size prem + specific co poem 5. Bond yield plus risk (BYPRP): add risk premium to YTM of co's LT debt |
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Burmeister Roll and Ross: 5 factors |
1. Confidence risk: unexpected change on diff between return on corp vs govt bonds 2. Time horizon risk: unexpected change in diff bw return of LT govt bonds and treasury bills 3. Inflation risk: unexpected change in inflation rate 4. Business cycle risk: unexpected change in level of real business activity 5. Market timing risk: equity market return not explained by other four factors |
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Tobin's Q |
(MKV debt + MKV equity) / replacement cost of total assets |
