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Interest is Big Valley's only fixed cash charge. Big Valley's market value of equity is $345, EBIT is $115, total sales are $775. Altman's Z-score
Interest is Big Valley's only fixed cash charge. Big Valley's market value of equity is $345, EBIT is $115, total sales are $775. Altman's Z-score model is Z=1.2X1+1.4X2+3.3X3+0.6X4+1.0X5. X1= Working Capital/Total Assets X2= Retained Earnings/Total Assets X3= EBIT/Total Assets X4= Market Value Equity/Book Value Long-Term Debt X5= Sales/Total Assets (a) Using the Altman's Z model, what is Big Valley's Z-score? (8 marks) (b) Should the FI make a loan to this firm? (2 marks)
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