Exam (elaborations)
CPA Exam BEC Formulas (1)
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CPA Exam BEC Formulas (1)
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CPA Exam BEC FormulasEffective Periodic Rate - ANS-Interest Paid per Period/ Net proceeds from Loan
Interest paid - ANS-Stated interest rate * principle amount
Net Proceeds - ANS-the remaining amount after deducting charges and fees related to loan
origination
Annual Percentage Rate - ANS-Effective periodic rate * periods in a year
Effective APR - ANS-[1+(i/n)]^n -1
i= stated interest rate
n= Compounding periods per year
Simple Interest Amount - ANS-P(i)(n)
P= Original Principal
i= interest rate
n= number of periods
Future Value - ANS-P(1+i)^n
P= Original principal
i= interest rate
n= number of periods
Required rate of return - ANS-Maturity risk premium + inflation premium + liquidity premium +
default risk premium
Weighted average interest rate - ANS-effective annual interest payments / debt outstanding
After tax cost of debt - ANS-Pretax cost of debt * ( 1- Tax Rate )
WACC - ANS-Cost of Debt ( weighted) + Cost of Equity ( Weighted)
((Market value of Equity/ total capital) * Cost of Equity) +
(((Market value of debt/Total capital)* Cost of debt) *(1- tax rate))
Cost of Preferred stock - ANS-Preferred Stock Dividends/ net proceeds of preferred stock
, Cost of retained earnings ( Discounted cash flow) - ANS-(D/P) +g
D= dividends per share expected at year end
P= Current market value of common stock
g= Constant rate of growth in dividends
Cost of retained earnings ( Capital Asset Pricing Model) - ANS-Risk Free Rate +( Beta + Market
Risk Premium)
Market Risk Premium - ANS-Market Return- Risk free rate
Cost of retained earnings ( Bond Yield Plus Risk Premium) - ANS-Pretax cost of long term debt
+ Market risk premium
Growth Rate - ANS-( Return on assets * Retention)/ 1-( return on assets * Retention)
Retention - 1- Dividends Payout Rate
Return on investments - ANS-Profit Margin * Investment Turnover
Profit Margin - ANS-Net income/ Sales
Investment Turnover - ANS-Sales/ Invested capital
Return on Assets - ANS-Net Income/ Average total assets
Return on Equity - ANS-Net income/ average total equity
Financial Leverage - ANS-Average total assets/ total equity
Return on equity - ANS-financial leverage * return on assets
Return on equity - ANS-financial leverage ( asset turnover * net profit margin
Net Profit Margin - ANS-Net income/ revenue
Tax burden - ANS-net income/ pretax income
Interest burden - ANS-Pretax Income / Earnings before Interest & Taxes (EBIT)
Operating income margin - ANS-EBIT/Sales
Return on sales - ANS-Operating Profit / Net Sales
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