Corporate Finance (FIN 201) Dividend Discount Model (DDM) Practice Problems: Gordon Growth + Two-Stage
New York University
Corporate Finance (FIN 201) | Practice Problems

Overview
A FIN 201 valuation problem set for finals: use the dividend discount model (DDM) for constant growth (Gordon) and simple two-stage growth with clean setup and discounting steps.

Key topics
•Gordon Growth Model variables (D1, r, g) and when it applies
•discount rate sanity checks and common inputs
•two-stage dividend timeline and workflow
•terminal value calculation and discounting
•common exam traps (D0 vs D1, g ??????? r, equity vs EV)

Suggested study tasks
•solve 10 Gordon growth valuation problems
•solve 6 two-stage DDM problems with terminal value
•compute implied growth rate in 6 prompts
•do 6 sensitivity mini-questions (how value changes with r or g)
•write a 9-step DDM checklist to follow under time pressure

Common pitfalls
•using g ??????? r (model breaks)
•forgetting to convert D0 to D1
•not discounting the terminal value correctly
•mixing up equity value vs enterprise value
•plugging in dividends when the prompt is about FCFE