As a senior loan officer at National Capital Bank, you have the following loan application waiting for review. The bank uses Altmans Z-score to assess loan acceptability. The banks cost of equity is 9 per cent.

An AA-rated, one-year business loan from a firm with the following financial statement information (in millions of dollars):

Assets			Liabilities and Equity
Cash	$40		Accounts payable	$55
Accounts receivables	120		Notes payable	60
Inventory	100		Accruals	70
			Long-term debt	650
Plant and equipment	1210		Equity (ret. earnings = $200)	635
Total assets	$1 470		Total liabilities and equity	$1 470

Also assume sales = $1250 million, cost of goods sold = $1100 million, and the market value of equity is equal to 2.0 times the book value. National Capital Bank uses the Altmans Z-score model to evaluate AA-rated loans.

(a) What is the Altman discriminant function value for the loan applicant? (4 marks)

(b) Should you approve the application to your bank for a capital expansion loan? (1 mark)