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Summary ACCA FINANCIAL MANAGEMENT F9 ALL FORMULAS AND COST OF EQUITY NOTES £5.99   Add to cart
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Summary ACCA FINANCIAL MANAGEMENT F9 ALL FORMULAS AND COST OF EQUITY NOTES
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This document contains all formulas required for ACCA F9 FINANCIAL MANAGEMENT paper. cost of equity, investment appraisal, weighted average cost of finance, all complex topics are covered and explained. all formulas compiled in one place.

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  • January 10, 2023
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  • 2022/2023
  • Summary

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Investment Appraisal
Saturday, March 26, 2022 6:51 PM




Accounting Rate of Return




IRR or DCF yield; Break-even cost of capital. Project to be accepted if IRR is greater than
the cost of capital.




PV of perpetuity = CF/r


Nominal cash flows (the actual expected cash flows at future prices, ie including inflationary increases)
should be discounted at a nominal discount rate, which is a rate relating to current market rates of
return. Real cash flows (cash flows in current prices) should be discounted at a real discount rate, which
is based on a nominal cost of capital that has been deflated by the general rate of inflation.
Perpetuity X


Discounted Payback



Consistent Cashflows


Effect of inflation and taxation in investment appraisal

FM F9 Page 1

,Effect of inflation and taxation in investment appraisal

Tax rate x Capital allowance = Tax Savings


Compound formula




FM F9 Page 2

, Capital Rationing

Project
Project Investment Cost PV CFs NPV Profitability Ratio Ranking NPV Ranking Profitability

Profitability Ratio = PV CFs/ Investment Cost
Project NPV at Year 1 NPV in Year 0 Value Loss in NPV

NPV in Year 0 Value = NPV at Year 1 x 0.909

Project Loss in NPV Investment Value Postponeability Index

Postponability Index = Loss in NPV/ Investment Value

After Tax Borrowing rate = Cost of Capital x (1-T)
Balancing Charge = Scrap Value x Tax Rate

Balancing Allowance = Purchase Value - Scrap Value - Cumulative Depreciation Allowances

Tax Savings on Lease = Tax Rate x Lease Payment




FM F9 Page 3

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