FIN 341 Practice Problems for Midterm Exam 2
1. A company paid a $2 per share dividend yesterday (Div0). You expect the dividend to grow
steadily at a rate of 3% per year forever.
a. What is the expected dividend at year 3?
b. If the discount rate for the
Chapter 11: Risk and Rates of Return
Introduction to Risk
Thus far, to calculate the value of an asset I have given you:
1. the expected cash flows
2. the appropriate discount rate
3. you have then calculated the present value of the cash flows.
As a mana
Chapter 9: The Time Value of Money
Why is a concept of the time value of the money important to individuals?
Individual investment (required rate of return, interest rate)
Why is it important to corporate managers?
and the Banking System
Specialized financial firms that facilitate the
indirect transfer of funds from savers to
borrowers by offering savings instruments and
Financial Markets and the
Investment Banking Process
A system comprised of individuals and
institutions, instruments, and procedures that
brings together borrowers and savers.
Diagram of Capital Formation Process
1. Dire T
Chapter 1 & 6
An Overview of Finance &
What is Finance
What comes up in your mind when you think of finance?
Finance deals with the concepts of time, money, and risk and how they
are interrelated. It also deals with how money is spent an
Chapter 13: Capital Budgeting
Capital Budgeting Preliminaries
Capital Budgeting is determining which long-term investments should be undertaken.
Some examples of long-term investments:
o Acquire a fixed asset such as a manufacturing plant
o Launch a new
Chapter 10 Bonds
WHAT IS A BOND?
A bond is a long-term loan to a company or government that is made by investors (or
bondholders). The borrower (company) receives funds today and in exchange agrees (or
enters into a contractual promise) to make a series o