calculation-reference

CFA Level I Corporate Issuers Calculations

NPV, IRR, WACC, cost of capital, leverage, and working-capital calculations.

TL;DR

Corporate Issuers calculations center on capital budgeting and financing decisions. NPV, IRR, WACC, cost of equity, cost of debt, operating leverage, and working capital are the core tools.

Formula Reference

WACC

WACC = (E/V)Re + (D/V)Rd(1 - T)

Use market-value weights when available.

NPV

NPV = sum[CF_t / (1 + r)^t] + CF0

Use NPV for value creation.

Degree of operating leverage

DOL = % change in operating income / % change in sales

Measures fixed operating cost sensitivity.

BA II Plus Keystrokes

Use CF worksheet for project cash flows.
Use STO/RCL for WACC weights and component costs.
Use percent-change arithmetic for leverage measures.

Worked Example

E/V = 60 percent, D/V = 40 percent, Re = 10 percent, Rd = 5 percent, tax rate = 25 percent.
WACC = 0.60 x 10 + 0.40 x 5 x (1 - 0.25) = 7.5 percent.
Use this as the discount rate for projects with comparable risk.

Common Mistakes

Using book weights when market weights are given.
Forgetting the tax shield on debt.
Ranking mutually exclusive projects by IRR instead of NPV.

Related Guides

CFA Level I Corporate Issuers Formula Sheet - Public formula sheet for WACC, capital budgeting, leverage, and working capital.
NPV and IRR Calculations for CFA Level I - Capital budgeting guide for net present value, internal rate of return, and BA II Plus cash flow worksheet inputs.
BA II Plus: NPV Calculation Step by Step - Exact BA II Plus keystrokes for net present value with a worked capital budgeting example.