TMExam.com. Calculations Cheat Sheet. Version 4.1. Full Version

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1 TMExam.com Calculatos Cheat Sheet Verso 4. Full Verso NOTE: The * symbol frot of ay formula dcates that the formula was ot or has chaged from the prevous verso of the CTP Exam from AFP. All formato ths Calculatos Cheat Sheet was cross-refereced wth or obtaed from Essetals of Treasury Professoals, 4th Ed, whch, tself, s a great complato of publcly avalable ad sometmes obscure facal formato. All calculatos ths Cheat Sheet are segmeted to ther assocated chapter Essetals of Treasury Professoals, 4th Ed. A specal thas to whch has prove to be a great resource for explaatos ad descrptos of may of the formula s above as well as our may baer ad treasury maagemet freds who have bee a great resource for formato verfcato. NOTE: Ths Cheat Sheet may or may ot cover all of the potetal calculatos that may be o the Certfed Treasury Professoal (CTP) exam. To determe the complete lst of calculatos, refer to Essetals of Treasury Professoals, 4th Ed, whch s the body of owledge for the CTP exam. Ths Cheat Sheet s meat to be a study ad used cojucto wth other study materal. Addtoally, a worg owledge of some of these calculatos may or may ot be ecessary for the CTP exam. NOTE: Some calculatos ad formulas were tetoally ot cluded ths documet for varous reasos:.e. we do ot beleve the formula wll be o the exam, the formula s too smple or too log to descrbe a format that wll wor ths documet, etc. We caot guaratee that a calculato or formula that we have tetoally ot cluded ths documet wll ot appear the exam ad t s your resposblty to study the exam materal completely order to determe what you beleve wll be ecessary to pass the exam. TMExam.com s dvdually owed ad s ot afflated wth or edorsed by the Assocato for Facal Professoals (AFP).

2 Chapter 7 Eargs Credt AC x (-RR) x (ECR x ) AC Average Collected Balace (total collected balace days cycle) RR Reserve Requremet (usually 0%) ECR Eargs Credt Rate Number of ays Moth Average Requred Balace (CB) SC ( ECR ) ( RR)) CB Requred Collected Balace (to offset Servce Charges) SC Ba Servce Charges ECR Eargs Credt Rate RR Reserve Requremet (usually 0%) Number of ays Moth Chapter 8 Collecto Float Avalablty Float + Processg Float + Mal Float sbursemet Float Clearg Float + Processg Float + Mal Float scout r [ Tx( )] Also called Float Neutral Calculato Essetals T Total days dfferece tmg betwee chec ad electroc paymets R Opportuty cost aual rate Cash Coverso Cycle (CCC) CCC ays Ivetory + ays Recevables ays Payables Cash Turover CCC

3 Multlateral Nettg System eterme the flow of fuds to & from each sedg locato pror to the ettg system. Flow from/to each subsdary Icomg fuds Outgog fuds If above amout s egatve, flow wll be to ettg ceter If above amout s postve, flow wll be from ettg ceter If above amout s 0, o fuds wll be trasferred to/from ettg ceter FV PV ( + ) FV PV ( ) ( ) ( ) PV FV ( ) FV ( ) Chapter 9 PV PV Preset Value FV Future Value Iterest rate # of Perods C C C C... ( ) ( ) ( ) ( ) C Cash Flow Amout for perod Iterest rate # of Perods Curret Rato TotalCurretAssets TotalCurretLabltes Quc Rato (acd test) Cash STIvestmets Accouts Recevables TotalCurretLabltes Cash Flow to Total ebt Rato NetIcome eprecato STebt LTebt Worg Captal Curret Assets Curret Labltes Ivetory ays Ivetory COGS Accouts Recevables ays Recevables AualSales

4 AccoutsPayable ays Payables COGS Cash Coverso Cycle ays Ivetory + ays Recevables ays Payables Cash Turover CashCoversoCycle * ays of Worg Captal (WC) ays Sales Ivetory + SO ays Payables CashFlowFromOperatos Cash Coverso Effcecy Sales scout Cost ( 00 ) ( N T ) scout % N Net Perod T scout Perod * scouted Amout Sale Amout x ( scout Rate Amout) * Effectve scout Rate ays scout Perod x AualIterestRate NetPayAmtx( scoutrt) PV of scout OppCost [ ( scoutperodaysx )] Assumes dscout s tae at last day of perod PV of Net Perod NetPayAmt OppCost [ ( scoutperodaysx )] NPV of scout PV of scout PV of Net ays Sales Outstadg (SO) Ous ta dga/ R AvealyCredtSales Average Past ue SO Ave ays of Credt Terms Mmum Trasfer WreCost ACHCost OpportutyCost ayssaved ays 4

5 Chapter Taxable Equvalet Yeld TaxExemptYeld ( TaxRate) After Tax Yeld Taxable Yeld x ( Ivestors Margal Tax Rate) Holdg Perod Yeld Amout RecevedatMaturty IvestmetAmout IvestmetAmout Aual Yeld Holdg Perod Yeld x aystomaturty -ay Bass Yeld 60-ay Bass Yeld x 60 ollar scout Par Value Purchase Prce Cash Receved at Maturty Amout Ivested scout Rate x Par Value x aystomaturty 60 scout Rate ollarscout 60 x ParValue aystomaturty Moey Maret Yeld Holdg Perod Yeld x 60 aystomaturty Bod Equvalet Yeld Holdg Perod Yeld x aystomaturty Moey Maret Yeld x 60 Purchase Prce Par Value ollar scout Prorated ealer Fee Aual Fee Rate x CP Issue Sze x aystomaturty 60 Prorated Bacup LOC Aual Bacup LOC Rate x Issue sze x aystomaturty 60 5

6 Aual CP Iterest scout ealerfee BacupFee UsableFuds aystomaturty Usable Fuds Face Value scout CP Nomal Yeld ollarscout PurchasePrce aystomaturty Iterest Pad Average Borrowg x All I Rate Fees o Uused Porto Uused Amout x Commtmet Fee TotalIterest Fees Aual Iterest Rate LeAmoutUsed TotalIterest Fees AmoutOfLeUsed CompesatgBalace Avalable Amout Borrowed Amout (Compesatg Balace % x Borrowed Amout) Borrowed Amout x ( Compesatg Balace %) Borrowed Amout Avalable Amout ( Compesatg Balace %) Iterest Rate Charged R Rs Free Rate IP Iflato rs Premum P efault rs Premum LP Lqudty rs Premum MP Maturty rs Premum R xipxpxlpx MP 6

7 Chapter * Coupo Bod Value. Ths s a year bod example, where you receve a coupo paymet for years, the receve coupo paymet plus purchase value the rd year. 68 C C P C *Bod Prce ( year example) ( r ) ( ) ( ) CV + CV + FP (eeded for urato) C y Bod Yeld x Bod Purchase Prce for the perod r opportuty costs of fuds () P Bod Purchase Prce CVx Coupo value for tme perod x FP Fal Paymet from coupo Bod (fal coupo + Bod Redempto value) *Bod urato for Ivestmet Retur. Ths s the perod of tme that t taes to receve the prce of the bod bac from the vestmet. You wll use the secod part of the formula above to determe durato. *urato xcv xcv xcv BV BV BV CV y Coupo value for perod y from prevous calculato BV Bod Value from prevous calculato CAPM s meat to estmate a vestors rate of retur usg both Tme Value of Moey ad rs. If a vestmets expected retur s below the requred rate determed by CAPM ( ), t s cosdered overprced. If the vestmet s prced above the requred rate of retur ( ), t s uderprced. Captal Asset Prcg Model (CAPM) ( ) M requred rate of retur o stoc holder s equty rs free rate of retur (.e. T-Bll) M rate of retur o maret varable (S&P) beta of asset or stoc 7

8 *Beta ( ) of a Portfolo shows the beta of a portfolo of multple stocs or securtes *Portfolo (% of Stoc x Stoc ) + (% of Stoc x Stoc ) *Portfolo Retur (% of Stoc x Stoc Retur) + (% of Stoc x Stoc Retur) PV C C C C... ( ) ( ) ( ) ( ) C Cash Flow Amout for perod Iterest rate # of Perods Preferred Stoc vded Preferred Stoc vded Rate x Par Value Prce of Preferred Stoc Preferred Stoc vded Requred Rate of Retur Preset value of a securty s determed by the Preset Value of Future Cash Flows the followg formula s used to calculate ths. Ths wll be used to determe the value of a asset (stoc) based o your requred rate of retur. PVo IV IV IV IV IV j... j j ( ) ( ) ( ) ( ) ( ) Vo Net Cash Flow to t IV vded for perod through Requred rate or retur or opportuty costs of fuds () ( G) 0 vded for perod through (assumes t s cosstet) 0 Curret vded G Estmated Growth Rate Number of Perods PVo (Alteratve Calculato) ( G) 0 ( ) Commo Stoc Prce 0 Curret vded G Estmated Growth Rate r Retur o Stoc s Po r G s 0 ( G) r G s 8

9 Chapter Movg Average Forecast (Sum of Hstorc Perods)/# of Hstorc Perods *Next Perod Forecast (Expoetal Smoothg Forecast) (Alpha)(Curret Perod Actual) + ( - Alpha)(Curret Perod Forecast) Exchage Rate Calculatos f $.5, the $ Ad x.5 $50.00 Chapter 6 *Chage Futures Cotract Value Ed of ay Cotract Rt Prev ay Cotract Rt x Currecy Amout of Future Cotract *New Marg Accout Value Prev ay Acct Value + Chg Future Cotract Value *Proft or Loss o Cotract Spot Maret Prce at Redempto Cotract Rate *Net Iterest Rate Rate Pd by Leder + Rate Pd for Swap Rate Rcved from Swap Assets Labltes + Shareholders Equty Labltes Assets Shareholders Equty Shareholders Equty Assets Labltes Chapter 8 Chapter 9 Breaeve Pot FxedCost PerUtSell Prce PerUtVarableCost Proftablty Idex (PI) PVofCashIflows PVofCashOutflows PVofCashIflows Cost If PI >, Accept Project Iteral Rate of Retur (IRR) IRR s where NPV 0 If IRR > WACC, Accept Project 9

10 Net Preset Value (NPV) NPV PV of Cash Iflows PV of Cash Outflows PV of Cash Iflows Cost C C C C... Cost ( ) ( ) ( ) ( ) Iterest Rate (scout) # of perods Cost $ output C Cash flow at each tme perod C C If NPV > 0, Accept Project Total Asset Turover Fxed Asset Turover Re veues TotalAssets Re veues NetProperty, Plat, adequpmet Curret Asset Turover Re veues CurretAssets Cash Coverso Effcecy Total Labltes to Total Assets CashFlowFromOperatos Sales TotalLabltes TotalAssets LT ebt to Captal LTebt LTebt Equty ebt to Tagble Net Worth Totalebt TotalEquty I ta gbleassets Tmes Iterest Eared (TIE) OperatgProft IterestExpese EBIT IterestExpese Operatg Proft Eargs before Iterest ad Taxes (EBIT) 0

11 Fxed Charge Coverage EBIT LEASEPMTS INTERESTEX P LEASEPMTS Gross Proft Marg GrossProft Re veues Operatg Proft Marg EBITA Marg EBITA Re veues EBIT Re veues Net Proft Marg NetIcome Sales Retur o Total Assets NetIcome TotalAssets NetIcome Total Re veue Total Re veue TotalAssets Retur O Sales x Total Asset Turover Retur o Commo Equty EargsAvalableToCommoShareholders CommoEquty ( NetIcome Preferredvdeds ) ( TotalEquty PreferredStoc) Retur o Ivestmet (ROI) NetIcome IvestedCaptal NetIcome LTebt Equty Resdual Icome (RI) Net Icome (Ivested Captal x Cost of Captal) Free Cash Flow (FCF) Net Ic + (eprec ad Amort) Chage Worg Captal Captal Expese *FCF Cash from Operatg Actvtes Captal Expedtures Ecoomc Value Added (EVA) EVA (EBIT x (-Tax Rate)) (WACC x (LT ebt + Equty)) Remember: EBIT Operatg Proft

12 Chapter 0 egree of Operatg Leverage egree of Facal Leverage % ChageIEBIT % ChageISales % ChageINetIcome % ChageIEBIT After-tax Cost of ebt AfterTax ( T) AfterTax After-tax Cost of ebt Pretax cost of ebt T Tax rate CAPM s meat to estmate a vestors rate of retur usg both Tme Value of Moey ad rs. If a vestmets expected retur s below the requred rate determed by CAPM ( ), t s cosdered overprced. If the vestmet s prced above the requred rate of retur ( ), t s uderprced. Captal Asset Prcg Model (CAPM) ( ) M requred rate of retur for rs free rate of retur (T-Bll) M rate of retur o maret varable (S&P) beta of asset Ecoomc Value Added (EVA) (Operatg Proft x (-Tax Rate)) (WACC x Total Captal) Remember: EBIT Operatg Proft Weghted Average Cost of Captal (WACC) [( W x )(-T)] + [( W E )( E )] W Proporto of captal represeted by LT ebt W E Proporto of captal represeted by equty ( )(-T) After-tax cost of debt E Cost of equty Pretax cost of LT ebt T Margal tax rate

13 *Lease vs Buy ecso Whe equpmet s eeded, the decso to lease vs buy should be evaluated o a varety of reasos. Whe mag a decso to buy, you should cosder the cost of facg, deprecato, tax savgs, value of the asset over tme, etc. 6 Essetals NPV of Owg calculates the PV of future cash outflows as depcted below. The fal year wll clude the total amout of the et cash outflow, whch may clude payg off the loa full, or may clude come from sellg the asset for ts deprecated value. NetCashFlowYr *NPV of Owg ( ) +. + NetCashFlowYrx x ( ) borrowg terest rate For the NPV of Leasg, you must cosder that the frst paymet wll be made mmedately, so there wll be o terest paymet due at that tme. NetCashFlowYr *NPV of Leasg 0 ( ) +. + NetCashFlowYrx x ( ) borrowg terest rate *Comparso of owg vs leasg Now that you have calculated the NPV of Owg ad NPV of Leasg, you ca determe the dfferece betwee the two for perod x. *Comparso of Ow vs Lease NPV of Owg NPV of Leasg Bascally, go wth the decso that has the hghest NPV (or the least egatve NPV) Remember: To mae ths determato, you must use the same umber of years for Owg calculato ad Leasg calculato order for the comparso to be true to the decso.

May 2005 Exam Solutions

May 2005 Exam Solutions May 005 Exam Soluto 1 E Chapter 6, Level Autes The preset value of a auty-mmedate s: a s (1 ) v s By specto, the expresso above s ot equal to the expresso Choce E. Soluto C Chapter 1, Skg Fud The terest