Intrinsic and Relative Valuation Formulas

  • Enterprise Value (EV) = Market Value of Equity + Total Debt + Preferred Stock + Non Controlling Interest – Cash and Cash Equivalents

 

  • Equity Value = Enterprise Value – Total Debt – Preferred Stock – Non Controlling Interest + Cash and Cash Equivalents

 

  • Terminal Value (Gordon Growth Method) = (Final Year Free Cash Flow * (1 + Perpetual Growth Rate)) / (WACC – Perpetual Growth Rate)

 

  • Enterprise Value via DCF = Sum of (Free Cash Flow in Year t / (1 + WACC)^t) + (Terminal Value / (1 + WACC)^n)

 

  • Weighted Average Cost of Capital (WACC) = ((Equity Value / Total Capital) * Cost of Equity) + ((Debt Value / Total Capital) * Cost of Debt * (1 – Tax Rate))
  • Cost of Equity (CAPM) = Risk Free Rate + (Beta * Market Risk Premium)

 

Multiples and Economic Profit Formulas

  • EV-to-EBITDA Multiple = Enterprise Value / EBITDA

 

  • Price-to-Earnings (P/E) Multiple = Market Price Per Share / Earnings Per Share

 

 

  • Economic Value Added (EVA) = Net Operating Profit Less Adjusted Taxes – (Total Capital Employed * WACC)

 

  • Net Operating Profit Less Adjusted Taxes (NOPAT) = Operating Income * (1 – Tax Rate)

 

  • Market Value Added (MVA) = Market Value of Firm – Total Capital Invested by Investors

 

Capital Budgeting and Investment Formulas

  • Net Present Value (NPV) = Sum of (Expected Cash Inflows in Year t / (1 + Hurdle Rate)^t) – Initial Cash Investment

 

  • Internal Rate of Return (IRR) Condition = NPV = 0

 

  • Total Shareholder Return (TSR) = ((Ending Stock Price – Beginning Stock Price) + Dividends Paid) / Beginning Stock Price

 

  • Profitability Index = Present Value of Future Cash Flows / Initial Cash Investment

 

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