1 Ratios Earnings Per Share Diluted Weighted Average Shares Outstanding Net Profit P E Ratio Price per Share EPS Formula Sheet Dividends Per Share Weighted Average Shares Outstanding Dividends Payout Ratio Dividends Net Income Operating Margin EBITDA Sales EBITDA Operating Income Depreciation Net Profit Margin Net Profit Income Sales Income Tax Rate TAX EBT Return on Shareholders Equity Net Profit Shareholders Equity Total Interest Coverage EBIT Interest Return on Total Capital Net Profit Interest on Long Term Debt 2 Long term Debt Shareholders Equity Net Profit Interest TL Shareholders Equity Long term Debt as a Percent of Total Capital can add Pref Stock Long Term Debt Pref Stock Long term Debt Shareholders Equity Enterprise Value MV of Equity MV of Tot Liab MV of Preferred Stock MV of Minority Interest Cash Cash Equivalents Market Value of Equity Price Share Shares Outstanding MB of Equity Market Value of Equity Book Value of Equity Current Ratio Current Liabilities Current Assets Quick Ratio Current Liabilities Inventory Turnover Inventories Debt Ratio Total Assets Current Assets Inventory Sales Total Liabilities Basic Earning Power EBIT Total Assets 2 Cost of Debt COD is the marginal interest rate or interest rate on new debt The before tax cost of debt on a new bond is YTM or Rd o Benchmark Comparably rated bonds o Benchmark Company bonds E r Take an average of comparables own company CF1 2 CF3 CFn CF 1 rd 1 1 rd 2 1 rd 3 1 rd n 3 Cost of Equity CAPM rs rrf rm rrf Alternatives to estimating rs 1 Before beginning to estimate cost of equity make a reasonable estimate by adding a 2 5 risk premium to long term bond yield to get a baseline estimate Use Gordon Discounted Cash Flow Model rs D1 P0 g 2 Based on historical growth rate estimate cost of equity 3 Estimate g using ROE Retention Rate then estimate cost of equity using most recent DPS and EPS to compute retention rate a ROE Net Income Book Value Equity b g DPScurrent DPSbeginning 4 Based on Analysts opinion of future growth in earnings reported in value line estimate cost of equity 4 Cost of Capital WACC WACC rs ws rd 1 T wd 1 Calculate Rd based on comparable bonds 2 Calculate Rd based on company s own bonds a Average these two numbers to get Rd 3 Calculate RSE a Estimate g i By adding 2 5 ii Using Historical Growth Rates iii Using ROE Retention Rate 4 Calculate Weights of Debt and Equity to use in formula a Book Value Based i Wd ii Wcs Total Liabilities Total Assets TL BV of Sh Eq BV of Share Equity TL BV of Sh Eq i Wd b Market Value Based TL Market Value of Equity TL Market Value of Equity MV of Equity TL ii Wcs