FINA 3332 EXAM 3 COMPLETE STUDY GUIDE
AND CORPORATE FINANCE AND VALUATION
REVIEW 2026
◉ A 5-year coupon bond with coupon rate 9% and semi-annual
payment. The required return is 7%.
What is semi-annual coupon payment?
What is the current value of such bond?
Answer: face value = 1000
coupon rate = 9%
semi annual coupon payment =face value∗coupon rate /
2=1,000×9%2=45
periods to maturity = 5*2 = 10 (n)
yield per period (r) = 7%/2 = 3.5%
bond′s price =semi annual coupon∗(1−(1+r)^(−n))/r + face
value/(1+r)^n
=45× ((1−(1+3.5%)^−10)÷3.5%) +
(1,000÷(1+3.5%)^10)=$1,083.17
semi annual coupon payment = $45
,current value of this bond = $1,083.17
◉ Firm ABC is going to pay an annual dividend of $2.00 per share.
Management just announced that future dividends will increase by 5
percent annually in the first two years and 2 percent annually
afterwards.
What is the amount of the expected dividend in year 5?
Increase by 2% annually what is the amount of dividend in year 5?
Answer: $2.00 per share is D0 or D1?
D1 = Expected Dividend = D1
Growth rate during year 2 is 5 percent; growth rate during year 4 is
2 percent
What is the amount of the expected dividend in year 5? 2.541
D1 = Expected Dividend = $2.00
g1 = Growth rate = 5%
g2 = Growth rate = 2%
n = 2 years
Expected dividend in year 5 =D1 ∗ (1+g1)^n ∗ (1+g2)^n
=2×(1+5%)^2×(1+2%)^2
=2.294082
,D1 = Expected Dividend = $2.00
g = Growth rate = 2%
n = 5-1 = 4 years
Expected dividend in year 5 =D1 ∗ (1+g)^n
=2×(1+2%)^4=2.164864
◉ How much are you willing to pay for one share if you require a 25
percent rate of return?
The Waffle House is going to pay annual dividend of $1.25 per share
in year one and the constant growth rate is 5%. How much are you
willing to pay for one share if you require a 25 percent rate of
return?
The Waffle House just paid annual dividend of $1.25 per share and
the constant growth rate is 5%. How much are you willing to pay for
one share if you require a 25 percent rate of return?
Answer: 3A)
constant annual dividend = 1.25
required rate of return = 25%
calculating the current price of the stock you should willing to pay
, current price =annual dividend / required return=1.25/ 25%=$5.00
therefore the current price of the stock you should willing to pay =
$5.00
3B) expected dividend in one year (D1) = 1.25
constant growth rate (g) = 5%
required rate of return (r) = 25%
calculating the current price of the stock using dividend growth
model
price =D1 / (r−g)
=1.25/(0.25−0.05)=$6.25
the current price of the stock you should be willing to pay is = $6.25
3C) dividend just paid (D0) = 1.25
constant growth (g) = 5%
required rate of return (r) = 25%
expected dividend (D1) =D0∗(1+g)
=1.25×(1+5%)=1.3125
calculating the current price of the stock using dividend growth
model
AND CORPORATE FINANCE AND VALUATION
REVIEW 2026
◉ A 5-year coupon bond with coupon rate 9% and semi-annual
payment. The required return is 7%.
What is semi-annual coupon payment?
What is the current value of such bond?
Answer: face value = 1000
coupon rate = 9%
semi annual coupon payment =face value∗coupon rate /
2=1,000×9%2=45
periods to maturity = 5*2 = 10 (n)
yield per period (r) = 7%/2 = 3.5%
bond′s price =semi annual coupon∗(1−(1+r)^(−n))/r + face
value/(1+r)^n
=45× ((1−(1+3.5%)^−10)÷3.5%) +
(1,000÷(1+3.5%)^10)=$1,083.17
semi annual coupon payment = $45
,current value of this bond = $1,083.17
◉ Firm ABC is going to pay an annual dividend of $2.00 per share.
Management just announced that future dividends will increase by 5
percent annually in the first two years and 2 percent annually
afterwards.
What is the amount of the expected dividend in year 5?
Increase by 2% annually what is the amount of dividend in year 5?
Answer: $2.00 per share is D0 or D1?
D1 = Expected Dividend = D1
Growth rate during year 2 is 5 percent; growth rate during year 4 is
2 percent
What is the amount of the expected dividend in year 5? 2.541
D1 = Expected Dividend = $2.00
g1 = Growth rate = 5%
g2 = Growth rate = 2%
n = 2 years
Expected dividend in year 5 =D1 ∗ (1+g1)^n ∗ (1+g2)^n
=2×(1+5%)^2×(1+2%)^2
=2.294082
,D1 = Expected Dividend = $2.00
g = Growth rate = 2%
n = 5-1 = 4 years
Expected dividend in year 5 =D1 ∗ (1+g)^n
=2×(1+2%)^4=2.164864
◉ How much are you willing to pay for one share if you require a 25
percent rate of return?
The Waffle House is going to pay annual dividend of $1.25 per share
in year one and the constant growth rate is 5%. How much are you
willing to pay for one share if you require a 25 percent rate of
return?
The Waffle House just paid annual dividend of $1.25 per share and
the constant growth rate is 5%. How much are you willing to pay for
one share if you require a 25 percent rate of return?
Answer: 3A)
constant annual dividend = 1.25
required rate of return = 25%
calculating the current price of the stock you should willing to pay
, current price =annual dividend / required return=1.25/ 25%=$5.00
therefore the current price of the stock you should willing to pay =
$5.00
3B) expected dividend in one year (D1) = 1.25
constant growth rate (g) = 5%
required rate of return (r) = 25%
calculating the current price of the stock using dividend growth
model
price =D1 / (r−g)
=1.25/(0.25−0.05)=$6.25
the current price of the stock you should be willing to pay is = $6.25
3C) dividend just paid (D0) = 1.25
constant growth (g) = 5%
required rate of return (r) = 25%
expected dividend (D1) =D0∗(1+g)
=1.25×(1+5%)=1.3125
calculating the current price of the stock using dividend growth
model
