Compute and Interpret Z-score Refer to the financial information for Cisco Systems in P4-31, to answer the requirements. Cisco’s stock closed at $30.53 on July 29, 2016 (the last trading day before fiscal year end).

Required

a. Compute and interpret the company’s Altman Z-scores for 2016.

b. The company has a large amount of liquid investments reported as current assets. What would be the effect on the company’s Altman Z-score of selling $25,000 of investments and using the proceeds for each of the following independent transactions:

i. Repay long-term debt.

ii. Pay dividends.

For each scenario, assume that the company’s market capitalization would decrease by $25,000 (in addition to any balance sheet effects of each transaction). Also assume that these transactions happen near year end such that there are no income statement effects in 2016.