Monday, November 21, 2011

Corporate Finance CFA

Interesting area of Corporate Finance:
Beta UN-levering and levering (how to relate b from asset to equity), this is one of the most interesting topics of corporate finance
Payback vs discounted payback
Money market yield & bond(base is price, relevant is like bond) vs discount basis yield(face value)
DTL=DOL*DFL which is :(S-TVC)/(S-TVC-F-I)
Country Risk Premium  (placed in the CAPM model): CRP= sovereign bond yield - T bond yield) *(sd of developing country index/sd or sovereign bonds in US currency)
"2/10 net 60" means 2% discount for paying an invoice within 10 days that is full after 60 days. Where formula is {1 + PD/(1-PD)}^365/days past discount -1
This is like effective of holding period yield annualized, observe it carefully and you will see that.

The cost of equity is sometimes related to cost of Debt + risk premium of equity over debt. Now for this kind of analysis we need to first calculate the cost of debt and add the risk premium. Common sense tells us that whenever we see premium it means something added to the base of a risk free instrument.

Country risk Premium (CRP)= sovereign yield spread * (Annualized Equity SD of developing country/Annualized Sovereign SD of sovereign bond market in terms of the developed currency)
Sovereign yield spread= difference in yield of govt bonds in developing country and treasury bonds 
Two terms multiplied in terms where one is bond and other is market of developing country.


Will be updating this post very soon..

1 comment:

  1. CF / Quant CF / CFA l2 / BAT

    Each page and each line of CFA L2 is like very important now.

    BAT course of 20 slides might be helpful on this.

    ReplyDelete