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QUESTION 2 (20 marks) Calculate the Altmans Z value for the following farms. (10 marks) Which of the two farms will you invest into and

QUESTION 2 (20 marks)

Calculate the Altmans Z value for the following farms. (10 marks)

Which of the two farms will you invest into and why? (5 marks)

What are the limitations of the Altmans Z statistics? (5 marks)

Variables

Crystal Farms

Lavish farm

X1(net working capital /total asset)

0.4563

0.1354

X2(retained earnings/total asset)

0.5236

0.0124

X3(EBIT/total assets)

0.1324

0.2013

X4(market value of equity/book value of total liability)

2.5632

0.2435

X5(sales/total asset)

0.9085

0.4032

Altmans Z - values

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