Quiz Time: Value Metrics Formulas

  1. EVA Spread 2) Economic Rate of Return 3) ROC 4) MVA (market value added)
  1. EVA Spread = EVA/IC OR EVA Spread = ROC - WACC 2. ERR = WACC 3. ROC = NOPAT/IC 4. MVA = EVA/WACC Next! Calculator entries for CFROI and Sinking Fund Factor? N= I/Y= PMT= PV= FV=
  1. EVA Spread = ROC - WACC 2. Drawing a blank on this one. 3. ROC = EVA/Capital 4.MV of Equity - Invested Capital?

Sinking fund factor: N= number of months on mortgage I/Y= rate/12 PV= 0 FV=1 PMT = calc CFROI…totally forget this but here’s a shot FV= gross non depreciable asset amt PMT = gross cash flow from investment PV = total value depreciable assets?? N= number of years I/Y = calc

  1. EVA Spread = EVA/Invested Capital - Wacc 2) Economic Rate of Return = no idea 3) ROC = NI/LTD + SH Equity 4) MVA (market value added) = Mkt value of Debt + MV of Equity - BV of Debt + BV of equity

Win! 1. ERAT 2. CFAT 3. Premayments(m)

Calculator entries for CFROI N= Years I/Y= solve PMT= CF PV= initial outlay FV= value of non-depreciable assets SFF - no idea

M&A 1. Value(Acquirer +Target) 2. Gain to Acquirer 3. Gain to Target 4. Price of Target in Stock deal

ERAT = Net Sales Price - Outstanding Mtg Balance - Cap Gains Tax - Acc Dep Tax CFAT = NOI - Debt Service - Taxes Payable Taxes Payable = NOI - Dep - Interest Exp * T

dinesh.sundrani Wrote: ------------------------------------------------------- > Win! > > 1. ERAT > 2. CFAT > 3. Premayments(m) ERAT = Sales - Cost of sale - mortgage amount - taxes payable taxes payable = (NOI - Int - Dep) x t CFAT = (NOI - debt service)(1-t) right?

ERAT = Selling price - selling costs - cap gains taxes - recaptured depreciation taxes - outstanding mortgage balance CFAT = NOI - Debt Service - income taxes taxes = (noi - interest - depreciation) * taxrate expected prepayment = (Principal balance - scheduled payment) * SMM SMM = 1 - (1-CPR)^(1/12)

Spreads (Nominal/Z/OAS-binomia/OAS-Monte) 1. HELOC 2. CC 3. Callable Bond 4. Auto Loan 5. Opti Free bond

oas-m z oas-b z z

  1. HELOC - ??? 2. CC - Z 3. Callable bond - OAS binomial? 4. Auto Loan - Z 5. option free - Z edit: meant OAS binomial for callable

PM 1. Market Model Return 2. Variance(i) 3. Convariance(i,j) 4. Active Risk 5. Active Return 6. Tracking Error

  1. HELOC - OAS monte Carlo 2. CC - Z spread 3. Callable bond - OAS binomial 4. Auto Loan - Z spread 5. option free - Z spread And not on the list: MBS - OAS monte carlo

M+A 1. V= Value of A + Value of T + Synergies - Cash Cost of Acquisition 2. Gain to Acquirer = Synergies - Transaction Premium 3. Gain to Target = Transaction Premium or (Value Paid for Company - Market Value of Firm ) 4. Price Target in Stock Deal: First find the number of shares that n’eed to be issued, so if company A is offering .5 shares for company B, then multiply compay Bs shares outstanding by the .5. Add these shares to the shares outstanding for company A. Then take the Value of Acquirer and add to Value of Target + Synergies, and then divide this by the new number of outstanding shares . This is the new price of the combined firm. Take this price and multiply it by the amt of shares used to acquire company B, and this is the price paid for the target company. The gain for the target is the target price - the initial value of the company. The gain for the acquirer is again the synergies expected minus the premium paid for company B.

^^ awesome post on the Stock acquisition cdawg. thanks.

  1. amrket model = Ri = ai + BiRm + ei where ai = return of port when RM = 0, RM = return of market portfolio, slope = systematic risk for I (beta) 2. Variance - Bi^2VarianceM + varriance error 3. Covariance - BiBmVarianceM 4. active risk - active factor risk and active specific risk. factor risk - attributable to factor tilts. specific risk - attributable to overweighting specific assets 5. active return = information ratio = (mean return - mean benchmark return) / (sd port - sd benchmark)

PM: 1. Market Model Return = alpha + B*Rm (?) 2. Variance of asset = Beta of asset ^2 * Variance Market + Unsystematic Risk of asset 3. Covariance = Beta of a * Beta b * Variance of market 4. Active Risk = Std deviation of (Expected Return of Portfolio - Exp Return of Market) 5. Active Return = (Expected Return of Portfolio - Exp Return of Market) 6. Aren’t active risk and tracking error the same thing?? Always confuse this.