Intermediate Financial Management Problems
Im studying for my Management class and dont understand how to answer this. Can you help me study?
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 stocks 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.
