intermediate financial management problems

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You must show the detailed step by step calculation and the final answer to all problems.For calculator problems, you must show all calculator inputs.

You require use of a financial calculator the TI BA II plus.

Problem 1:

A company has got $500 in cash and cash equivalents, $300 in inventory and $200 in account receivables. The firm has long term assets of $500. The firm has accounts payables of $200. All other current liabilities total $400. The firm had sales of $10000, EBIT of $5000, interest expenses of $2000 and net income of $800. Compute the following ratios:

Current ratio
DSO
TIE
profit margin
Total asset turnover

Problem 2:

A firm has current liabilities of $500. Account receivables are $300 and inventory is $400. All other current assets equal $800. Long term assets are $5000, long term liabities are $2500, sales is $8000, EBIT is $2000, interest expenses are $600 and net income is $100. Compute the following ratios:

Current ratio
Debt ratio
TIE
ROA
DSO

Problem 3:

A bond was issued 3 years ago at a coupon rate of 6%. Since then, interest rates have declined to 4%. The bond matures 20 years from today. Compute the current market value of this bond.

Problem 4:

A stock paid a dividend of $1.50 yesterday. The stock is expected to grow at a rate of 4% per year indefinitely. Investors require a return of 13% to invest in this stock. Compute its fair market value.

Problem 5:

A stock’s next 3 dividends are as follows: $0.50, 0, $1.00. After that, the stock is expected to grow at a rate of 2% indefinitely. The required return on this stock is 12%. Compute its intrinsic value.

Problem 6:

A stocks next 2 dividends are as follows: $0.25 and $1.00. After that, the stock is expected to grow at a rate of 4% indefinitely. The required return on this stock is 16%. Compute its fair market value.

Problem 7:

A bond was issued 2 years ago. It’s original maturity was 20 years. The coupon rate is 4% and the current YTM is 6%. Compute its intrinsic value.

Problem 8:

A stock’s next expected dividend is $0.50. Dividends are expected to grow at a rate of 3% indefinitely. The required return is 10%. Compute its intrinsic value.

Problem 9:

A stock’s next 2 dividends are expected to be $0.50 and $0.75, respectively. Afterwards, dividends are expected to grow at a constant rate of 4% per year indefinitely. The required return on this stock is 12% during the non-constant period and 10% afterwards. Compute its fair market value.

Problem 10:

Use the Black-Scholes Model to find the price for an European call option with the following inputs: Current stock price is $30; the strike price is $35; the option matures in 4 months; the annualized risk free rate is 5%; and the variance of the stock return is 0.25.

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