Module 29.3 LOS 29.o: Using DuPont ROE to estimate a sustainable growth rate
The sustainable growth rate, the rate at which earnings and dividend can grow indefinitely, can be calculated by multiplying the …
CFA Level II
Module 31.4 LOS 31.h: Relating Justified PE to Justified PS and Justified PB
From the justified PE equation we can derive several relationships to PS and PB ratios: where: V0 = fundamental value D0 = …
Module 20.3 LOS 20.h: Economic Income in capital budgeting
A project’s economic income is the after-tax cash flow plus the change in the investment’s market value. Interest is ignored for cash …
Module 25.3 LOS 25.j: Estimate the value of a target company using comparable company and comparable transaction analyses
In comparable company analysis, we calculate an estimate of firm value using relative valuation metrics, and then add a takeover …
Module 25.4 LOS 25.n Carve outs, spin-offs and liquidations
Firm can decrease in size through divestitures, which usually involve a sale of a portion of a firm to an …
Module 25.4 LOS 25.k, 25.i: Post-acquisition value created using different payment methods
For mergers to occur in a rational sense, the value of the combined firm should be worth more than the …
Module 29.2 LOS 29.f: Justified Leading and Trailing P/E
Justified P/Es are based on firm fundamentals. The leading P/E uses earnings forecasts from the next period while the trailing …
Module 19.5 LOS 19.e: Balance Sheet Accruals Ratios
The fewer accrual accounting adjustments that are made from operating cash flow, the higher the earnings quality will be. We …
Module 17.2 – 17.5: CAMELS: Capital Adequacy and Liquidity Position
CAMELS is an acronym for the six factor analysis of bank health. It covers capital adequacy, asset quality, management, earnings, …
Module 17.1 LOS 17.b: Capital Requirements of Financial Institutions
Financial institutions must meet the Basel III minimum standards for capital levels, liquidity and stable funding. The Basel III standards …