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Advanced Financial Management

Formulae and Tables

Modigliani and Miller proposition 2 (with tax)

V d
i
i
k = k + 1 –T k – k V e
e
d
e
e

The capital asset pricing model

E r = R + β E r – R
i
f
m
f

The asset beta formula

V e V 1 – T
d
β = β + β
a V + V 1 – T e V + V 1 – T d
e
e
d
d

The growth model

D (1 + g)
0
P = r – g
0
e

Gordon’s growth approximation

g = br
e

The weighted average cost of capital

V e V d
WACC = k + k (1 – T)
e
d
V + V d V + V d
e
e

The Fisher formula

1 + i = 1 + r (1 + h)

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