FINC 3610 Final Exam: Modules 6-10 2025 With Accurate Solutions

the _______ (value) of a bond is equal to the PV of the bond's future CF - Answer price companies can stop paying _______ whenever they want to - Answer dividends 3 types of dividends: - Answer 1. no growth or zero growth 2. constant growth 3. non-constant growth *1 and 2 both use formulas no growth or zero growth dividends (perpetuity) - Answer dividends do not increase in dollar amount, they remain CONSTANT. *D1=D2=D3=D4=D5 with no growth/zero growth dividends, dividends are paid EVERY year __________ - Answer forever formula for no growth/zero growth dividends: - Answer PV0 = D1/r no growth/zero growth dividend example: - Answer $10 dividend; 10% required return; what is price of share of stock? $10/.10 = $100 constant growth dividends (growing perpetuity) - Answer dividends increase at a fixed rate (g) each period formula for constant growth dividends: - Answer PV0 = D1/r-g constant growth dividend example: - Answer $10 dividend; 8% required return; 5% growth; what is current stock price? $10/.08-.05 = $333.33 non-constant growth dividends - Answer the growth of these dividends is NON CONSTANT. 3 steps to solve non-constant growth problems: - Answer 1. Draw timeline and find values (#(1+r)) 2. Find when the dividend becomes either constant or constant growth (constant growth formula) 3. Bring it back to zero/today (discount back to find present value) for dividends, understand that ___ means just paid - Answer 0 for dividends, understand that ___ means 1 year from now - Answer 1 common stock - Answer equity = common stock. - voting rights - dividends - classes of stock *if stock type not specified, assume it is common stock. preferred stock - Answer debt in disguise. - NO voting rights - dividends -- zero growth stock (cumulative/noncumulative) - stated/liquidating value - preferred stock and debt stock price reporting - Answer -issue (stock and symbol) -price (current) -change (net change) -% change -volume issue (stock and symbol) - Answer stock: The Home Depot symbol: HD price (current price) - Answer changes constantly; number that is big and bold change (net change) - Answer the dollar amount the stock price has increased or decreased compared to the previous day at closing % change - Answer the amount the price has changed since yesterday's closing in percentage terms volume - Answer # of shared traded with equity/common stock, there is _________ interest - Answer ownership with equity/common stock, common stockholders _____ for the board of directors and other issues - Answer vote with equity/common stock, dividends are ____ considered a cost of doing business and are ____ tax deductible - Answer NOT. *subject to double taxation with equity/common stock, dividends are NOT a liability of the firm and stockholders have NO _____ recourse - Answer legal NPV or NPV related: - Answer - Net Present Value (NPV) - Internal