The Altmans Z-score model is a linear discriminant model used to predict manufacturing firms default risk.

(i) Calculate the Z-score for Lancaster Manufacturing Ltd., with the following information (in $ million). (3 marks)

Working Capital = 250, Total Assets = 4560, Earnings before Interest and Taxes (EBIT) = 750, Net Income = 370, Market Value of Equity = 2340, Book Value of Long-Term Debt = 1100, Sales = 1550, Dividend Payout Ratio = 45%.

(ii) Interpret the Z-score calculated in part (i). If you are a bank manager, will you lend to Lancanster Manufacturing Ltd.? Explain your answer. (3 marks)