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Acquirer’s Gain (formula)

Acquirer’s Gain = Synergies – (Price paid for Target – Value of Target)

Acquirer’s Gain = Synergies – Premium Paid

Pension Expense on Income Statement IFRS vs USGAAP

IFRS USGAAP
+ Current Service Cost
+ Past Service Cost
+ Discount Rate * (Beginning PBO – Beginning Plan Assets)
+ Current Service Cost
+ Amortization of Past Service Cost
+ Interest Cost (= Discount Rate * Beginning PBO)
– Expected Return on Plan Assets (= Expected Rate of Return * Beginning Plan Assets)
+/- Amortization of Actuarial Gains / Loses
Pension Expense on Income Statement Pension Expense on Income Statement

Total Periodic Pension Cost

+ Current Service Cost

+ Past Service Cost

+ Interest Cost

– Actual Return on Plan Assets

+/- Actuarial gains / loses


Total Period Pension Cost

When running a simulation, to improve the quality of the probability distribution you should:

Directly estimate the statistical parameters

For most variables the historical or cross-sectional data will be insufficient or unreliable.

If a bond’s OAS is greater than the OAS of bonds with similar characteristics and credit quality then it is most likely:

Underpriced

Being long the FRA means you gain when ____ rises.

LIBOR or whatever the floating rate rises.

When the forward contract is established, the forward price is negotiated such that the market value of the forward contract is?

Zero on the initiation date.

This is a result of the principal of no-arbitrage.

Bonds with the same credit rating have ____ probability of default but ____ severity of loss given default.

Bonds with the same credit rating have approximately the same probability of default but not necessarily the same severity of loss given default.

Remember credit ratings are ordinal rankings and do not adjust quickly to changes in business cycle. This extra stability lowers the correlation with default probabilities.

EV vs EVA vs MVA

EV = Enterprise Value

EV = Market Value of Common Equity, Preferred Shares & Debt – Cash & Cash Equivalents & Short Term Investments like marketable securities

EVA = Economic Value Added

EVA = EBIT(1-tax) – $WACC

$WACC = WACC * Invested Capital

MVA = Market Value Added

MVA = Market Value of total Capital – Book Value of Capital

Capital = Debt plus Equity basically L + SE

How to calculate Working Capital Invested?

[(Current Assets – Cash and Equivalents)@t – (Current Liabilities – Notes Payable and Current Portion of Long Term Debt)@t] – [(Current Assets – Cash and Equivalents)@t-1 – (Current Liabilities – Notes Payable and Current Portion of Long Term Debt)@t-1]