| Title: | Tools for Valuation, Financial Metrics and Modeling in Corporate Finance |
|---|---|
| Description: | Balance sheet and income statement metrics, investment analysis methods, valuation methods, loan amortization schedules, and Capital Asset Pricing Model. |
| Authors: | Pavlos Pantatosakis [aut, cre] |
| Maintainer: | Pavlos Pantatosakis <[email protected]> |
| License: | GPL (>= 2) |
| Version: | 1.0 |
| Built: | 2024-11-11 05:14:31 UTC |
| Source: | https://github.com/cran/corpmetrics |
This package provides essential financial functions tailored for Economics undergraduates, MBA students, and investors, enabling them to evaluate and screen investment opportunities effectively. It covers a wide range of corporate finance topics, including Key Performance Indicators (KPIs) from balance sheets and income statements, investment analysis methods such as Net Present Value (NPV) and Internal Rate of Return (IRR), valuation techniques for discounted dividends and fixed income securities. Additionally, it includes loan amortization schedules and the Capital Asset Pricing Model (CAPM).
| Package: | corpmetrics |
| Type: | Package |
| Version: | 1.0 |
| Date: | 2024-09-08 |
| License: | GPL-2 |
Pavlos Patantosakis [email protected].
Pavlos Pantatosakis [email protected].
The Investopedia Team (2024). Useful Balance Sheet Metrics. https://www.investopedia.com/financial-edge/1012/useful-balance-sheet-metrics.aspx)
Hayes A. (2024). Profitability Ratios: What They Are, Common Types, and How Businesses Use Them. https://www.investopedia.com/terms/p/profitabilityratios.asp
Picardo E. (2024). P/E Ratio vs. EPS vs. Earnings Yield: What's the Difference? https://www.investopedia.com/articles/investing/120513/comparing-pe-eps-and-earnings-yield.asp
Berk, J. B. and DeMarzo, P. M. (2017). Corporate finance. Pearson Education. - ISBN: 1292160160
Ehrhardt, M. C. and Brigham, E. F. (2010). Corporate finance: A focused approach. South-Western Cengage Learning. - ISBN: 1439078084
Jordan, B. D., Ross, S. A., and Westerfield, R. W. (2010). Fundamentals of corporate finance. McGraw Hill. - ISBN: 9780073382395
Will Kenton (2024). Capital Asset Pricing Model (CAPM): Definition, Formula, and Assumptions. https://www.investopedia.com/terms/c/capm.asp
Calculate balanace sheet ratios: (1) Working Capital, (2) Current Ratio, (3) Acid Test Ratio, (4) Leverage (L/A), (5) Debt-to-Equity.
balsh(FA,CA,INV,FL,CL)balsh(FA,CA,INV,FL,CL)
FA |
Fixed Assets (Numeric Variable). |
CA |
Current Assets (Numeric Variable). |
INV |
Inventory (Numeric Variable). |
FL |
Fixed (Long-term) Liabilities (Numeric Variable). |
CL |
Current (Short-term) Liabilities (Numeric Variable). |
Total Assets, Total Liabilities and Total Equity are computed in function.
A data.frame with the 5 metrics and their respective values.
Pavlos Pantatosakis.
R implementation and documentation: Pavlos Pantatosakis [email protected].
The Investopedia Team (2024. Useful Balance Sheet Metrics. https://www.investopedia.com/financial-edge/1012/useful-balance-sheet-metrics.aspx)
## # Example usage example <- balsh( FA = 2450000, # Fixed Assets CA = 770000, # Current Assets INV = 450000, # Inventory FL = 1180000, # Fixed Liabilities CL = 490000 # Current Liabilities ) print(example)## # Example usage example <- balsh( FA = 2450000, # Fixed Assets CA = 770000, # Current Assets INV = 450000, # Inventory FL = 1180000, # Fixed Liabilities CL = 490000 # Current Liabilities ) print(example)
Calculate if a stock is fairly valued based on Capital Asset Pricing Model (CAPM) returns.
capm(Rf,Ri,Rm)capm(Rf,Ri,Rm)
Rf |
A numerical vector with the risk-free rates. |
Ri |
A numerical vector with the yields of the asset. |
Rm |
A numerical vector with the yields of the market. |
Use the same length for the three vectors.
A data.frame including the required return based on Capital Asset Pricing Model (CAPM), the expected (mean) return of the asset and the asset's beta. Lastly, the stock's valuation is assessed: the stock is considered overvalued if the required return exceeds the expected return, and undervalued if the expected return is higher than the required return.
Pavlos Pantatosakis.
R implementation and documentation: Pavlos Pantatosakis [email protected].
Will Kenton (2024). Capital Asset Pricing Model (CAPM): Definition, Formula, and Assumptions. https://www.investopedia.com/terms/c/capm.asp
## # Example usage Rf <- rnorm(250, 0.03, 0) # Constant 3% risk free rate Ri <- rnorm(250, 0.13, 0.10) # Asset under study Rm <- rnorm(250, 0.09, 0.04) # Market's (can be an index) returns example <- capm(Rf,Ri,Rm) print(example) #You can add a data.frame with real data #Choose a vector with the risk free rate (Rf) #Choose a vector with the stock returns (Ri) #Choose a vector with the market returns (Rm)## # Example usage Rf <- rnorm(250, 0.03, 0) # Constant 3% risk free rate Ri <- rnorm(250, 0.13, 0.10) # Asset under study Rm <- rnorm(250, 0.09, 0.04) # Market's (can be an index) returns example <- capm(Rf,Ri,Rm) print(example) #You can add a data.frame with real data #Choose a vector with the risk free rate (Rf) #Choose a vector with the stock returns (Ri) #Choose a vector with the market returns (Rm)
Calculate the value of a common stock from discounted dividends, by employing (1) Zero Growth Model, (2) Gordon's Model, (3) Differential Growth Model.
ddm(DIV,RETURN,G1,G2,PER)ddm(DIV,RETURN,G1,G2,PER)
DIV |
Dividend at period 0 (Numeric variable). |
RETURN |
Required return of the investor (Numeric variable). |
G1 |
Expected growth rate (Numeric variable) - Optional (Essential for Gordon's model & the differential growth model). |
G2 |
Expected growth rate after the period of change (Numeric variable) - Optional (Essential for the differential growth model). |
PER |
Period at which the growth rate changes (Numeric variable) - Optional (Essential for the differential growth model). |
For the Zero Growth Model, fill in DIV and RETURN; for Gordon's Model, include DIV, RETURN, and G1; and for the Differential Growth Model, provide DIV, RETURN, G1, G2, and PER.
A data.frame presenting the model employed and the stock's value based on discounted dividents.
Pavlos Pantatosakis.
R implementation and documentation: Pavlos Pantatosakis [email protected].
Jordan, B. D., Ross, S. A., and Westerfield, R. W. (2010). Fundamentals of corporate finance. McGraw Hill. p. 234-240 - ISBN: 9780073382395
## # Example usage #Company pays a dividend of 3 currency units per share #Investors require a return of 8% example <- ddm( DIV = 3, # Dividend Amount in currency units RETURN = 0.08 # Required Return of the investor ) print(example) #Company pays a dividend of 0.8 currency units per share #Investors require a return of 10% #The dividend is expected to grow at a constant rate of 4% example2 <- ddm( DIV = 0.8, # Dividend Amount in currency units RETURN = 0.10, # Required Return of the investor G1 = 0.04 # Growth rate ) print(example2) #Company pays a dividend of 2 currency units per share #Investors expect a return of 12% #The dividend is projected to grow at 8% for the first 3 years #Then at 4% example3 <- ddm( DIV = 2, # Dividend Amount in currency units RETURN = 0.12, # Required Return of the investor G1 = 0.08, # Growth rate G2 = 0.04, # Growth rate after PER PER = 3 # Growth rate change happens in Period 3 ) print(example3)## # Example usage #Company pays a dividend of 3 currency units per share #Investors require a return of 8% example <- ddm( DIV = 3, # Dividend Amount in currency units RETURN = 0.08 # Required Return of the investor ) print(example) #Company pays a dividend of 0.8 currency units per share #Investors require a return of 10% #The dividend is expected to grow at a constant rate of 4% example2 <- ddm( DIV = 0.8, # Dividend Amount in currency units RETURN = 0.10, # Required Return of the investor G1 = 0.04 # Growth rate ) print(example2) #Company pays a dividend of 2 currency units per share #Investors expect a return of 12% #The dividend is projected to grow at 8% for the first 3 years #Then at 4% example3 <- ddm( DIV = 2, # Dividend Amount in currency units RETURN = 0.12, # Required Return of the investor G1 = 0.08, # Growth rate G2 = 0.04, # Growth rate after PER PER = 3 # Growth rate change happens in Period 3 ) print(example3)
Calculate discounted cash flows of a bond's coupon payments and its sensitivity to interest rate change.
fis(FV,CR,YTM,MAT,SEMI)fis(FV,CR,YTM,MAT,SEMI)
FV |
Face value of the bond (Numeric Variable). |
CR |
Coupon rate of the bond (Numeric Variable). |
YTM |
Yield to maturity (Numeric Variable). |
MAT |
Maturity in years (Numeric Variable). |
SEMI |
Select between annual or semi-annual coupon payments (default is annual). |
The default option is annual coupon payments. To select semi-annual payments, set SEMI = TRUE.
A data.frame with the results of the financial instrument's price in currency units, its duration and modified duration in years.
Pavlos Pantatosakis.
R implementation and documentation: Pavlos Pantatosakis [email protected].
Jordan, B. D., Ross, S. A., and Westerfield, R. W. (2010). Fundamentals of corporate finance. McGraw Hill. p. 193-202. - ISBN: 9780073382395
Berk, J. B. and DeMarzo, P. M. (2017). Corporate finance. Pearson Education. p.205-220 & p.1073-1074 - ISBN: 1292160160
## # Example usage # Face value = 1,000 currency units # Coupon rate = 8% # Yield to maturity = 8% # Maturity = 6 years example <- fis( FV = 1000, # Bond with face value of 1.000 currency units CR = 0.08, # 8% Coupon rate YTM = 0.08, # 8% Yield to maturity MAT = 6 # 6 periods to maturity ) print(example) # Face value = 1,000 currency units # Coupon rate = 8% # Yield to maturity = 12% # Maturity = 2 years # Coupons pay semi-annually example2 <- fis( FV = 1000, # Bond with face value of 1.000 currency units CR = 0.08, # 8% Coupon rate YTM = 0.12, # 8% Yield to maturity MAT = 2, # 6 periods to maturity SEMI = TRUE ) print(example2)## # Example usage # Face value = 1,000 currency units # Coupon rate = 8% # Yield to maturity = 8% # Maturity = 6 years example <- fis( FV = 1000, # Bond with face value of 1.000 currency units CR = 0.08, # 8% Coupon rate YTM = 0.08, # 8% Yield to maturity MAT = 6 # 6 periods to maturity ) print(example) # Face value = 1,000 currency units # Coupon rate = 8% # Yield to maturity = 12% # Maturity = 2 years # Coupons pay semi-annually example2 <- fis( FV = 1000, # Bond with face value of 1.000 currency units CR = 0.08, # 8% Coupon rate YTM = 0.12, # 8% Yield to maturity MAT = 2, # 6 periods to maturity SEMI = TRUE ) print(example2)
Basic investment decision methods: (1) Net Present Value (NPV), (2) Internal Rate of Return (IRR).
idm(CFS,COST)idm(CFS,COST)
CFS |
A numerical vector with the investment's expected cash flows. |
COST |
A numerical vector with the investment's expected cost of capital (interest rates). |
The first cash flow must be the initial cost of investment, thus a negative value. Cash flows and interest rates must have the same length.
A data.frame with the investment decision methods and their respective values.
Pavlos Pantatosakis.
R implementation and documentation: Pavlos Pantatosakis [email protected].
Berk, J. B. and DeMarzo, P. M. (2017). Corporate finance. Pearson Education. p.100-103 & p.248-251 - ISBN: 1292160160
Ehrhardt, M. C. and Brigham, E. F. (2010). Corporate finance: A focused approach. South-Western Cengage Learning. p. 383-389 - ISBN: 1439078084
## # Example usage # Initial Investment = 100 currency units # Expected to bring 120 currency units the next period # The cost of capital is 10% example <- idm( CFS = c(-100,120), COST = c(0,0.1) ) print(example)## # Example usage # Initial Investment = 100 currency units # Expected to bring 120 currency units the next period # The cost of capital is 10% example <- idm( CFS = c(-100,120), COST = c(0,0.1) ) print(example)
Calculate income statement ratios: (1) Gross Profit Margin, (2) Net Profit Margin, (3) Earnings Per Share (EPS), (4) Price to Earnings (P/E) Ratio.
insta(REV,COS,NET,PREF,SHARES,PPS)insta(REV,COS,NET,PREF,SHARES,PPS)
REV |
Revenue (Numeric Variable). |
COS |
Cost of Sales (Numeric Variable). |
NET |
Net Income (Numeric Variable). |
PREF |
Amount of Preferred Stock Dividend (Numeric Variable) - Optional (Essential for the calculation of EPS & P/E Ratio). |
SHARES |
Number of Shares (Numeric Variable) - Optional (Essential for the calculation of EPS & P/E Ratio). |
PPS |
Price per Share (Numeric Variable) - Optional (Essential for the calculation of P/E Ratio). |
A data.frame with the 4 ratios and their respective values.
Pavlos Pantatosakis.
R implementation and documentation: Pavlos Pantatosakis [email protected].
Hayes A. (2024). Profitability Ratios: What They Are, Common Types, and How Businesses Use Them. https://www.investopedia.com/terms/p/profitabilityratios.asp
Picardo E. (2024). P/E Ratio vs. EPS vs. Earnings Yield: What's the Difference? https://www.investopedia.com/articles/investing/120513/comparing-pe-eps-and-earnings-yield.asp
## # Example usage example <- insta( REV = 25000000, # Revenue COS = 19850000, # Cost of Sales NET = 1000000, # Net Income PREF = 100000, # Preferred Stock Dividend SHARES = 100000, # Number of Shares PPS = 120 # Price per Share ) print(example)## # Example usage example <- insta( REV = 25000000, # Revenue COS = 19850000, # Cost of Sales NET = 1000000, # Net Income PREF = 100000, # Preferred Stock Dividend SHARES = 100000, # Number of Shares PPS = 120 # Price per Share ) print(example)
Calculate the installments, interest, principal and debt balance for each period of a loan.
loan(AMOUNT,RATE,PER)loan(AMOUNT,RATE,PER)
AMOUNT |
Amount of the loan (Numeric Variable). |
RATE |
Loan's periodic interest rate (Numeric Variable). |
PER |
Periods to maturity (Numeric Variable). |
A list with 2 data.frames: (1) Summary, presenting the installment and the repayment amount. (2) Amortization Table for all periods of the loan until maturity.
Pavlos Pantatosakis.
R implementation and documentation: Pavlos Pantatosakis [email protected].
Ehrhardt, M. C. and Brigham, E. F. (2011). Corporate finance: A focused approach. South-Western Cengage Learning. p. 156-160 - ISBN: 1439078084
## # Example usage example <- loan( AMOUNT = 100000, # 100.000 currency units loan RATE = 0.05, # 5 % periodic interest PER = 4 # 4 periods to maturity ) print(example) # Another example example2 <- loan( AMOUNT = 1000, # 1.000 currency units loan RATE = 0.20, # 20 % periodic interest PER = 3 # 3 periods to maturity ) print(example2$AmortizationTable) # For amortization table print(example2$AmortizationTable[5]) # Balance for each period## # Example usage example <- loan( AMOUNT = 100000, # 100.000 currency units loan RATE = 0.05, # 5 % periodic interest PER = 4 # 4 periods to maturity ) print(example) # Another example example2 <- loan( AMOUNT = 1000, # 1.000 currency units loan RATE = 0.20, # 20 % periodic interest PER = 3 # 3 periods to maturity ) print(example2$AmortizationTable) # For amortization table print(example2$AmortizationTable[5]) # Balance for each period