Equity Investments

Front 1

Measure of Industry Concentration

Back 1

Front 2

ROE

Back 2

Front 3

Intrinsic P/E:
FF, g, & G

Back 3

Front 4

Effect of inflation on leading P/E

Back 4

1 / real required return + [ ( 1-inflation flow-through rate) x inflation rate]

Front 5

Holding Period Return

Back 5

(P1 - P0 + CF1) / P0 = [ (P1 + CF1) / P0 ] - 1

Front 6

Adjusted Beta

Back 6

(2/3) x (regression beta) + (1/3) x (1.0)

Front 7

Weighted Average Cost of Capital

Back 7

Front 8

Gordon Growth Model Equity Risk Premium

Back 8

= One year forecasted dividend yield on market index + consensus long-term earnings growth rate - long term governments bond yield

Front 9

Gordon Growth Model (V0)

Back 9

[ D0 x ( 1 + g ) ] / ( r - g ) = D1 / ( r - g)

Front 10

Two-stage Model

Back 10

Front 11

Value of Perpetual Preferred Shares

Back 11

Dp / rp

Front 12

Present Value of Growth Opportunities

Back 12

(E / r ) + PVGO

Front 13

H - Model

Back 13

Front 14

Sustainable Growth Rate

Back 14

Front 15

Value with Free Cash Flow Models

Back 15

firm value = FCFF discounted at the WACC

equity value = FCFE discounted at the required return on equity

Front 16

Free Cash Flow to the Firm

Back 16

FCFF = Nl + NCC + [Int x (1 -tax rate)] - FCInv - WCInv

= [EBIT x (1 - tax rate)] + Dep - FCInv - WCInv

= [EBITDA x (1 - tax rate)] + (Dep x tax rate) - FCInv - WCInv

= CFO + [lnt x (1 -tax rate)] - FCInv

Front 17

Free Cash Flow to Equity:

Back 17

=FCFF- [lnt x (I -tax rate}] + net borrowing

=NI + NCC - FCInv - WCInv + net borrowing

=CFO - FCInv + net borrowing

=Nl - [(I - DR) x (FCInv - Dep)] - [(I - DR) x WCInv]

Front 18

Weighted average cost of capital:

Back 18

= (We x r) + [Wd x rd x (1- tax rate)]

Front 19

Single-Stage FCFF Model:
Value of the Firm

Back 19

= FCFF1 / ( WACC - g )

= [ FCFF0 x ( 1 + g ) ] / ( WACC - g )

Front 20

Single-Stage FCFE Model:
Value of Equity

Back 20

= FCFE1 / ( r - g ) = [ FCFE0 x ( 1 + g ) ] / ( r - g )

Front 21

Trailing P/E

Back 21

market price per share / EPS over previous 12 months

Front 22

Leading P/E

Back 22

market price per share / forecasted EPS over next 12 months

Front 23

P/B Ratio

Back 23

=market value of equity / book value of equity = market price per share / book value per share

Front 24

P/S Ratio

Back 24

=market value of equity / total sales

=market price per share / sales per share

Front 25

P/CF Ratio

Back 25

=market value of equity / cash flow

=market price per share / cash flow per share

where:
cash flow= CF, adjusted CFO, FCFE, or EBITDA

Front 26

EV / EBITDA Ratio

Back 26

Enterprise value / EBITDA

Front 27

Trailing D/P

Back 27

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

Front 28

Leading D/P

Back 28

forecasted dividends over next four quarters / market price per share

Front 29

Justified Trailing P/E

Back 29

Front 30

Justified Leading P/E

Back 30

Front 31

Justified P/B Ratio

Back 31

( ROE - g ) / ( r - g )

Front 32

Justified P0 / S0

Back 32

[ (E0 / S0) x ( 1 - b ) x ( 1 + g) ] / ( r - g )

Front 33

Justified P/CF Multiple

Back 33

[ FCFE0 x (1+ g) ] / ( r - g)

Front 34

Justified Dividend Yield D0 / P0

Back 34

P/E Ratio / g

Front 35

Weighted Harmonic Mean

Back 35

Front 36

Residual Income

Back 36

Front 37

Economic Value Added

Back 37

NOPAT- $WACC

Front 38

NOPAT

Back 38

=EBIT x (I - t)

=(sales- COGS - SGA - dep) x (I - t)

Front 39

$WACC

Back 39

WACC x invested capital

Front 40

invested capital

Back 40

= net working capital + net property, plant, and equipment

=long-term debt + stockholders' equity

Front 41

EVA spread

Back 41

= ROC - WACC

= EVA / Invested Capital

Front 42

ROC

Back 42

NOPAT / Invested Capital

Front 43

Vf

Back 43

= invested capital + ( EVA / WACC)

= invested capital + MVA

Front 44

Implied Growth

Back 44

g = r - [ (B x (ROE - r)) / V - B ]

Front 45

Market Value Added (MVA)

Back 45

= MV of firm - invested capital

Front 46

MV of Firm

Back 46

=MV of debt + MV of equity