Question
The following table shows some financial data for two companies: A B Total Assets $1,637.1 $1,650.7 EBITDA 43.0 87.0 Net income + interest 63.0 41.0
The following table shows some financial data for two companies:
| A | B | |
| Total Assets | $1,637.1 | $1,650.7 |
| EBITDA | 43.0 | 87.0 |
| Net income + interest | 63.0 | 41.0 |
| Total liabilities | 644.0 | 1,367.1 |
Use the following formula to compute the probability of default.
Log(relative chance of failure) = 6.445 1.192(ROA) + 2.307(liabilities / assets) .346(EBITDA / liabilities)
What is each company's relative chance of failure? (Use 2.71828 as the value of "e". Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Company A chance of failure %
Company B chance of failure %
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The Concepts And Practice Of Mathematical Finance
Authors: Mark S. Joshi
2nd Edition
0521514088, 9780521514088
