Alternative investments


Weight on the exam = 3%

Number of formulas = 7

CFA formulas

quantitative economics financials

corpfin portfolio equity

fixedincome derivatives alternative


Real estate value

Real estate is land and anything fixed, immovable, or permanently attached to it such as appurtenances, buildings, fences, fixtures, improvements, roads, shrubs and trees (but not growing crops), sewers, structures, utility systems, and walls.


Vre - real estate value

NOI - net operating income

r -required return

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Net operating income

Net operating income is rental income of a property after operating expenses.


NOI - net operating income

Incpot - potential income

Vac&BD% - vacancy and bad debt %

REtaxes - real estate taxes

Main - maintenance

OthExp - other expenses

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Annual after-tax operating cash flow

After-tax operating cash flow is measure of financial performance that looks at the company's ability to generate cash flow through its operations.


CFOat - annual after-tax operating cash flow

NOI - net operating income

Depr - depreciation

Int - interest

t - tax rate

PrRep - principal repayment

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After-tax sale proceeds

After-tax sale proceeds is the amount of money left for the investor upon a sale after deducting all sale costs and taxes.


SaleProat - after-tax sale proceeds

Ps - sales price

Mort - mortgage balance

Tg - tax on gain

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Tax on gain


Tg - tax on gain

tcap gains - capital gains tax rate

Ps - sales price

Ppurch - purchase price

Depr - depreciation

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Probability of success

The equation measures the probability of success using a probability of failures in each year of the project's life.


SPN - probability of success in for N-year project

FP1 - probability of failure in year 1

FP2 - probability of failure in year 2

FPN - probability of failure in year N

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Net present value

Net present value is a sum of present values of individual cash flows.


NPV - net present value

EPN - expected payoff

SPN - probability of success

r - discount rate

N - project's length

InitInv - initial investment

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