Formulas

Question 1

EBITDA formula

Answer 1

EBITDA=NetIncome + Interest + Taxes + Depreciation + Amortization

Question 2

Beta levered

Answer 2

Question 3

Beta unlevered

Answer 3

Question 4

Sources for Beta

Answer 4

Bloomberg (raw & adjusted beta)

Yahoo Finance (usually 2-year weekly beta)

Analyst reports

Regression of stock returns vs. market (e.g., S&P 500)

Question 5

Cost of Debt

Answer 5

If public: Use current yield to maturity (YTM) of company’s traded debt

If private: Estimate using credit rating and yield spreads (e.g., Moody’s Baa)

Question 6

Basic EPS

Answer 6

Question 7

Normalized

Question 8

Calendarization (for Comparable Companies)

Answer 8

Question 9

Normalized

Answer 9

Normalized financials adjust a company’s earnings or other metrics to remove the effects of non-recurring, one-time, or unusual items.

Examples of Adjustments:

Remove gains or losses from asset sales

Exclude one-time legal settlements

Adjust for non-recurring restructuring charges

Strip out COVID-related government subsidies or temporary closures

Normalize owner compensation in private businesses

Question 10

Pro Forma Financials

Answer 10

Pro forma financials present how the financial statements would look after a future event occurs, such as an acquisition, financing, or restructuring.

Question 11

Beta

Answer 11

Measure of systematic risk.

How much returns move in relation to the overall market

Cov between stock and market return

/

Variance of market returns

Question 12

Beta examples

Answer 12

EComm 1.5
Health 0.7 to 1.0
Banking 1.0
Industrials 1.0 to 1.2
Gold -0.5
Oil 1.3