2. XYZ PLC, Inc. Balance Sheet (in thousands) is given here below: Assets Liabilities $ 50 $ 80 $ 70 Cash Accounts Receivable Inventory Plant & Equipment $ 700 Depreciation$100 Net Plant & Equipment Total Account Payable Notes Payable Accruals Long Term Debt Equity $140 $100 $ 20 $340 $200 $600 $800 Total $800 Also assume Sales =800; Cost of goods sold = $300; Taxes = $60; Interest payments = $50; XYZ has a 50% dividend payout ratio; and the market value of equity is equal to its book value. (a) Determine the following variables: (i) EBIT (ii) Net Income (iii) Retained Earnings. (b) Altman's discriminant function is given by: Z=1.2X1 + 1.4X2 + 3.3X3 +0.6X4+ 1.0X5 Where: Xi = Working Capital/Total Assets (TA). X2 = Retained Earnings/TA X3 = EBIT/TA X4 = Market Value of Equity/Long Term Debt Xs = Sales/TA Required: (i) Compute XYZ's Z-Score using Altman's discriminant function, the Balance Sheet data, and the figures determined in (a) above. How would this firm be classified according to the Z-score obtained in (i) above and based on the following criteria: Ue Z= 1.682 as the cut-off rate (indeterminate default risk firm); 1.682-3.00: a low default risk firm (Committee discussion for approval or rejection; >3.00: A lowest risk customer: Automatic approval). (iii) Should you approve XYZ PLC, Inc. application to your bank for a $700,000 dollar loan? Explain why or why not