BUSFIN 4211 - Corporate Finance
Exam Actual Questions and Answers
2026
Lecture 1 - Time Value of Money -
correct answer ✅Lecture 1 - Time Value of Money
Time Value of Money -
correct answer ✅The time value of money (TVM) is the idea
that money available at the present time is worth more than the
same amount in the future due to its potential earning capacity.
This core principle of finance holds that, provided money can earn
interest, any amount of money is worth more the sooner it is
received.
Future Value - Single Period -
correct answer ✅FV = PV * (1+r)
Future Value = Present value * (1+rate)
Future Value - Multiple Periods -
correct answer ✅FV = PV * (1+r)^T
,BUSFIN 4211 - Corporate Finance
Exam Actual Questions and Answers
2026
Future Value = Present Value * (1+rate)^TPeriods
Example: FV = $100 * (1.01)^2 = 102.01
Present Value -
correct answer ✅The value of cash flows in present value
terms.
Number of Periods -
correct answer ✅The length of time required for a single
cash flow(present value) to reach a certain amount(future value)
based on the time value of money.
Perpetuity -
correct answer ✅A perpetuity is a security that offers a fixed
payment C forever.
- Bank of England created the first perpetuity bond, the Consol,
in1751.
PV(perpetuity) = payment/rate
,BUSFIN 4211 - Corporate Finance
Exam Actual Questions and Answers
2026
Growing Perpetuities -
correct answer ✅Perpetuities that grow at a constant rate
forever.
PV(grow perp) = payment / (rate - growing rate)
Important: C1 is the cash flow from a year ahead, not today!
Annuity -
correct answer ✅An annuity is a security that offers a fixed
payments C at regular intervals for a fixed time periods T.
- Most car loans and mortgages are annuities.
PV(annuity) = payment/interest * [1 - 1/(1+rate)^Tperiods]
Lecture 2 and 3 - Stock Valuation I -
correct answer ✅Lecture 2 and 3 - Stock Valuation I
, BUSFIN 4211 - Corporate Finance
Exam Actual Questions and Answers
2026
How are firms financed? -
correct answer ✅Firms are financed through debt or equity
(or stock).
Two types of stock -
correct answer ✅Common and Preferred
Preferred Stocks -
correct answer ✅Preferred stocks receives dividends but
does not have voting rights.
- usually issued in private rather than public deals (e.g. Goldman
and Buffett in 2008)
- preferred dividends are paid out before common dividends.
Tax Treatment
- Not tax deductible to the issuing firm
- There is a dividend exclusion of 70% that applies to corporations
that own less than 20% of the other company. (In order words, 70%
of dividends received from another corporation are tax-free.) If the
company owns more than 20%, the dividend exclusion is 80%.
Exam Actual Questions and Answers
2026
Lecture 1 - Time Value of Money -
correct answer ✅Lecture 1 - Time Value of Money
Time Value of Money -
correct answer ✅The time value of money (TVM) is the idea
that money available at the present time is worth more than the
same amount in the future due to its potential earning capacity.
This core principle of finance holds that, provided money can earn
interest, any amount of money is worth more the sooner it is
received.
Future Value - Single Period -
correct answer ✅FV = PV * (1+r)
Future Value = Present value * (1+rate)
Future Value - Multiple Periods -
correct answer ✅FV = PV * (1+r)^T
,BUSFIN 4211 - Corporate Finance
Exam Actual Questions and Answers
2026
Future Value = Present Value * (1+rate)^TPeriods
Example: FV = $100 * (1.01)^2 = 102.01
Present Value -
correct answer ✅The value of cash flows in present value
terms.
Number of Periods -
correct answer ✅The length of time required for a single
cash flow(present value) to reach a certain amount(future value)
based on the time value of money.
Perpetuity -
correct answer ✅A perpetuity is a security that offers a fixed
payment C forever.
- Bank of England created the first perpetuity bond, the Consol,
in1751.
PV(perpetuity) = payment/rate
,BUSFIN 4211 - Corporate Finance
Exam Actual Questions and Answers
2026
Growing Perpetuities -
correct answer ✅Perpetuities that grow at a constant rate
forever.
PV(grow perp) = payment / (rate - growing rate)
Important: C1 is the cash flow from a year ahead, not today!
Annuity -
correct answer ✅An annuity is a security that offers a fixed
payments C at regular intervals for a fixed time periods T.
- Most car loans and mortgages are annuities.
PV(annuity) = payment/interest * [1 - 1/(1+rate)^Tperiods]
Lecture 2 and 3 - Stock Valuation I -
correct answer ✅Lecture 2 and 3 - Stock Valuation I
, BUSFIN 4211 - Corporate Finance
Exam Actual Questions and Answers
2026
How are firms financed? -
correct answer ✅Firms are financed through debt or equity
(or stock).
Two types of stock -
correct answer ✅Common and Preferred
Preferred Stocks -
correct answer ✅Preferred stocks receives dividends but
does not have voting rights.
- usually issued in private rather than public deals (e.g. Goldman
and Buffett in 2008)
- preferred dividends are paid out before common dividends.
Tax Treatment
- Not tax deductible to the issuing firm
- There is a dividend exclusion of 70% that applies to corporations
that own less than 20% of the other company. (In order words, 70%
of dividends received from another corporation are tax-free.) If the
company owns more than 20%, the dividend exclusion is 80%.
