1
MGT 181 Midterm 2 Questions with Correct
Answers | Updated (100% Correct Answers)
Two ways of stockholder cashflow Answer: 1. Company pays
dividends
2. Selling share to individual/back to company
Price of stock Answer: Present value of ALL expected future
dividends
Maximum amount willing to pay 1 period Answer: 1. Add dividend
amount + amount that you can sell
2. Enter Value 1 as FV
3. Enter % of return as I/Y
4. N = 1
5. Press PV for amount to pay
Maximum amount willing to pay X period Answer: 1. 0 for CF0
2. X for X period into CFx
3. Selling price + dividend for last year into last CF
4. Enter ROI %
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5. Press NPV
Constant Dividend Answer: Firm will pay constant dividend forever
(Just like preferred stock)
Price is computed using the PERPETUITY FORMULA
Perpetuity Formula Answer: PV of Perpetuity = D/r
PV = Present Value
D = Dividend or Coupon per period
r = discount rate
Constant Dividend Growth Answer: Firm will increase the dividend
by a constant percent every year
Computed using the GROWING PERPETUITY MODEL
Growing perpetuity model Answer: PV of Growing Perpetuity = D1
/r-g
D = Dividend or Coupon at period 1
R = discount rate
G = growth rate
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, 3
Supernormal Growth Answer: Dividend growth is not consistent
initially. Settles down to constant growth eventually.
Calculated using multi-stage model
Growing perpetuity hint Answer: Remember to check if the dividend
was just paid and the question is about the next dividend that
would've had a growth rate already.
If the question is asking for the upcoming dividend, treat that as
dividend 1.
Stock valuation using multiples Answer: Pt = Benchmark PE Ratio *
EPS
Pt = Stock price at the time
PE Ratio = Industry average, provided
EPS = Earnings per share
Common Stock Features Answer: Voting Rights
Proxy Voting
Classes of stock
Other Rights:
* Share proportionally in declared dividends
© 2025 All rights reserved
MGT 181 Midterm 2 Questions with Correct
Answers | Updated (100% Correct Answers)
Two ways of stockholder cashflow Answer: 1. Company pays
dividends
2. Selling share to individual/back to company
Price of stock Answer: Present value of ALL expected future
dividends
Maximum amount willing to pay 1 period Answer: 1. Add dividend
amount + amount that you can sell
2. Enter Value 1 as FV
3. Enter % of return as I/Y
4. N = 1
5. Press PV for amount to pay
Maximum amount willing to pay X period Answer: 1. 0 for CF0
2. X for X period into CFx
3. Selling price + dividend for last year into last CF
4. Enter ROI %
© 2025 All rights reserved
,2
5. Press NPV
Constant Dividend Answer: Firm will pay constant dividend forever
(Just like preferred stock)
Price is computed using the PERPETUITY FORMULA
Perpetuity Formula Answer: PV of Perpetuity = D/r
PV = Present Value
D = Dividend or Coupon per period
r = discount rate
Constant Dividend Growth Answer: Firm will increase the dividend
by a constant percent every year
Computed using the GROWING PERPETUITY MODEL
Growing perpetuity model Answer: PV of Growing Perpetuity = D1
/r-g
D = Dividend or Coupon at period 1
R = discount rate
G = growth rate
© 2025 All rights reserved
, 3
Supernormal Growth Answer: Dividend growth is not consistent
initially. Settles down to constant growth eventually.
Calculated using multi-stage model
Growing perpetuity hint Answer: Remember to check if the dividend
was just paid and the question is about the next dividend that
would've had a growth rate already.
If the question is asking for the upcoming dividend, treat that as
dividend 1.
Stock valuation using multiples Answer: Pt = Benchmark PE Ratio *
EPS
Pt = Stock price at the time
PE Ratio = Industry average, provided
EPS = Earnings per share
Common Stock Features Answer: Voting Rights
Proxy Voting
Classes of stock
Other Rights:
* Share proportionally in declared dividends
© 2025 All rights reserved
