| A | B |
|---|
| degree of operating leverage | change in EBIT / change in sales or sales - tvc / (sales - tvc - fc) |
| degree of financial leverage | change in EPS / change in EBIT |
| degree of total leverage | change in EPS / change in SALES |
| in the claims valuation approach | debt and equity cash flows are valued separately and then added together |
| residual income | NI less an equity charge |
| economic profit | EBIT(1-tax rate) - $wacc |
| MVA or market value added | sum of EP / (1+wacc) |
| Discount for lack of control | 1 - [1 / (1+control premium)] |
| shares required for a pe firm, s(pe)= | S(e)[f/1-f] |
| if you want to test whether a correlation coefficient is significant then compute the t-stat | r(SQRT(n-2)) / SQRT(1-r^2) |
| V(book value method)= | BV + [(ROE-r) * BV] / (r - g) |
| p0 / bv = | (ROE-g) / (r-g) |
| p0 / e1 = | (1-b) / (r-g) |
| p0 / e0 = | (1-b)(1+g) / (r-g) |
| p0 / s0 = | (e0 / s0) * (1-b) * (1+g) / (r-g) |
