Financial Management Final Exam
Questions and Answers Graded A+
if you buy a stock, how can you receive cash? - Correct answer-company pays
dividends, you can sell your shares
OCF sales, cost, tax, dep = - Correct answer-(sales - costs)(1 - T) + (T x dep)
if you expect a $2 dividend in one year, and expect a $14 return if you sell the
stock, and need a required return of 20%, what is the PV of your stock? - Correct
answer-13.33 (FV = 16 (14 +2), I/Y = 20, n = 1, CPT PV = -13.33)
in addition to a $2 dividend in year 1, you expect a dividend of $2.10 in 2 years,
and a stock price of $14.70 at the end of year 2, what is the PV of the stock? -
Correct answer-13.33 (0 gCFo, 2 gCFj, 16.80 gCFj ($2.10 div +$14.70 sale), i =
20, CPT NPV = 13.33)
what is constant dividend growth? - Correct answer-the company decides to pay a
$3 dividend forever
another name for constant dividend is - Correct answer-zero growth
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, constant dividend growth is when - Correct answer-the firm increases dividend by
a constant % every period
supernormal growth - Correct answer-dividend growth isn't consistent initially but
settles down to constant eventually
zero growth = - Correct answer-P = D / R
Suppose stock is expected to pay a $0.50 dividend every quarter and the required
return is 10% with quarterly compounding. What is the price? - Correct answer-
$20 (P = .50 / (.) = $20)
dividend growth model = - Correct answer-P = D0(1+g)/(R-g)=
As the growth rate approaches the required return, - Correct answer-the stock price
increases dramatically
Suppose Big D, Inc., just paid a dividend of $0.50 per share.
It is expected to increase its dividend by 2% per year.
If the market requires a return of 15% on assets of this risk, how much should the
stock be selling for? - Correct answer-$3.92 (P0 = .50(1+.02) / (.15 - .02) = $3.92)
Suppose TB Pirates, Inc., is expected to pay a $2 dividend in one year.
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Questions and Answers Graded A+
if you buy a stock, how can you receive cash? - Correct answer-company pays
dividends, you can sell your shares
OCF sales, cost, tax, dep = - Correct answer-(sales - costs)(1 - T) + (T x dep)
if you expect a $2 dividend in one year, and expect a $14 return if you sell the
stock, and need a required return of 20%, what is the PV of your stock? - Correct
answer-13.33 (FV = 16 (14 +2), I/Y = 20, n = 1, CPT PV = -13.33)
in addition to a $2 dividend in year 1, you expect a dividend of $2.10 in 2 years,
and a stock price of $14.70 at the end of year 2, what is the PV of the stock? -
Correct answer-13.33 (0 gCFo, 2 gCFj, 16.80 gCFj ($2.10 div +$14.70 sale), i =
20, CPT NPV = 13.33)
what is constant dividend growth? - Correct answer-the company decides to pay a
$3 dividend forever
another name for constant dividend is - Correct answer-zero growth
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
, constant dividend growth is when - Correct answer-the firm increases dividend by
a constant % every period
supernormal growth - Correct answer-dividend growth isn't consistent initially but
settles down to constant eventually
zero growth = - Correct answer-P = D / R
Suppose stock is expected to pay a $0.50 dividend every quarter and the required
return is 10% with quarterly compounding. What is the price? - Correct answer-
$20 (P = .50 / (.) = $20)
dividend growth model = - Correct answer-P = D0(1+g)/(R-g)=
As the growth rate approaches the required return, - Correct answer-the stock price
increases dramatically
Suppose Big D, Inc., just paid a dividend of $0.50 per share.
It is expected to increase its dividend by 2% per year.
If the market requires a return of 15% on assets of this risk, how much should the
stock be selling for? - Correct answer-$3.92 (P0 = .50(1+.02) / (.15 - .02) = $3.92)
Suppose TB Pirates, Inc., is expected to pay a $2 dividend in one year.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
