Exam (elaborations)
BEC CPA Exam Formulas_Ratios (1)
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- CISA: Domain #2, Part A: IT Governance
BEC CPA Exam Formulas_Ratios (1)
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BEC CPA Exam Formulas/RatiosStated Interest Rate/ SAR/ Nominal Int. Rate - ANS-no calculation needed!
EIR (effective int. rate) - ANS-EIR= Int. paid per period/net loan proceeds
=((P*SAR)/#ofperiods)/net loan proceeds
net loan proceeds=
loan proceeds - compensating balance
APR (annual percentage rate) - ANS-APR= EIR * periods in a year
EAR (effective annual percentage rate) - ANS-EAR = (1 + EIR) -1
= (1 + (i/P)) ^P - 1
= ( (1+SR)/#ofperiods)^#ofperiods
i: SAR
P: compounding periods in a year
Simple interest - ANS-SI= P * Rate * Time
Compound interest - ANS-CI= P (1 + EIR)^n
= P (1 + i)^n
Required Rate of Return (0 sum game) - ANS-Rror = RFR + Risk Premiums
= (real rate of return + inflation premium) + RP
Risk Free Rate - ANS-RFR = real rate of return + inflation premium
Value of a Firm - ANS-= PVFCF/WACC
ROIC (return on invested capital) - ANS-NI / (Inv. Cap * WACC%)
WACC (weighted avg cost of capital) - ANS-WACC= (Cost of E. * E%ofA's) + (ATax COD * %D)
BE SURE AFTER TAX COST OF DEBT!!
, (bc. debt int. is deductible)
Weighted Avg. Cost of Debt - ANS-step 1: WAIR= EIR pmt.'s / debt outstanding
step 2: get ATCOD = PTCOD (1-tax rate)
step 3: multiply by % of Debt of total Assets
Pretax to after tax - ANS-Pretax = ATAX/ (1-tax rate)
After tax to pretax - ANS-After tax= Pretax * (1-tax rate)
Cost of P/S - ANS-Cost of P/S= (P/S dividends) / (net proceeds P/S)
P/S dividends= Par * %
net proceeds of P/S=
P/s proceeds - flotation costs - disc. value loss
3 Methods of Cost of R/E's (Common Equity) - ANS-1. CAPM
2. DCF
3. BYPR
CAPM - ANS-=RFR + (beta *(Mkt. Return - RFR))
beta - ANS-the volatility of own stock to S&P 500
1: as risky
>1: riskier
<1: less risky
mkt return - ANS-S&P 500 rate
RFR - ANS-yield of government bond
= Required Rate of Return + Inflation Premium
g (growth rate) - ANS-g= ROE * retention rate
g= (NI/E) * (1-payout rate)
retention rate - ANS-= 1-payout rate
= (C/S div's declared) / (inc. - P/S)
Market Return on Interest on 1 year Treasury Bill - ANS-= RFR + Inflation Premium %
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