Self Appraisal

TATO = sales/total assets

PM = Net Income/Sales

BEP =EBIT/TA

ROA = NI/Total assets

ROE = NI/Common Equity

Common equity = common stocks

FATO = Sales / NFA

NFA = net property plant and equipment

NOPAT = EBIT (1-Tax rate)

CR = operating capital/sales

EVA = NOPAT- (WACC)(Capital)

EBIT = revenue – operating expenses + non-opreating income

Operating income = revenue – operating expenses

EROIC = next years NOPAT/Capital OR next years OP/CR

OPM = EBIT/Sales

EROIC = (Op t+1/CRt)/capital t or NI-Dividends/total capital or NOPAT x (1+g)/operating capital

WACC –

Cost of debt = rd (1-t) (percentage)

Cost of preferred stock = Dps/Pps(1-f)

Cost of new equity = D0 (1+g)/P0 (1-flotation) + growth rate

Cost of RE = rs = rrf + (rm-rrf)b or DCF = rs = D1/P0 + g

WACC =

NPM = NI/Sales

MVA = Market value of the firm – book value of the firm

Or MVA = MV of Equity – BV of equity

Market value = (# shares of stock) (price per share) + Value of debt

Book Value = Total common equity + value of debt

 MIRR =

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158.1/100 = 1.581 then cube root and subtract 1 = 16.49

Dupont – A firm’s ROE reflects it use of debt financing or leverage as reflected by its net profit margin, the efficiency with which it uses its assets as measured by the total asset TO ratio and its ability to generate sales and manage its production costs and operating expenses by its equity multiplier.

= NPM x TATO x EM

= Net income/sales x sales/total assets x total assets/common equity

G= (1-POR)(ROE)

WACC –

What are the decision criteria for independent projects?  If the cash flows of one are unaffected by the acceptance of the other. NPV and IRR always lead to the same reject/accept decision Mutually exclusive – if the cash flows of one can be adversely impacted by the acceptance of the other What is consistent for inconsistent for Mutually Exclusive projects?  Timing differences and Project size or scale differences What is the primary decision tool for Mutually Exclusive Projects? The general rule of the NPV method is that independent projects are accepted when NPV is positive and rejected when NPV is negative. In the case of mutually exclusive projects, the project with the highest NPV should be accepted. Accept project if IRR is greater, NPV is the “end-all” What tool do we use to identify where the decision rules are consistent or inconsistent?