Useful Financial Formulae

Definitions

pow(x) = to the power of x.

Value of a Perpetuity

PV = 1 / r

Value of a Growing Perpetuity (“Gordon” model)

PV = 1 / (r - g)

Annuity

PV = (1 / r) - (1 / r(1 + r)pow(t))

Continuos Compounding

PV = 1 / e pow(rt)

where: r = the continuously compounded rate of interest

Capital Asset Pricing Model

r = rf + ß (rm - rf)

Retailing

where GM = gross margin on retail price and MU = mark-up on cost price

GM = MU / (1+MU)
MU = GM / (1-GM)

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