1. The Here Today Corporation has applied to your bank for a loan. You have their financial statements and the Z-score model of:

Z = 6.56*(Net Working Capital/Total Assets) + 3.26*(Accumulated Retained Earnings/Total Assets) + 1.05*(EBIT/Total Assets) + 6.72*(Book Value of Equity/Total Liabilities) where:

Z < 1.23 predicts bankruptcy; Z between 1.23 and 2.90 indicates a gray area; and Z > 2.90 indicates no bankruptcy.

From the financial statements, you gathered the following:

Net working capital $237,500

Accum. Retained Earnings: $120,000

BV of equity: $950,000

Total assets: $4,750,000

EBIT: $261,250

Total Liab.; $3,800,000

Should the bank lend to Here Today? Why or why not? Base your decision on the analysis of the financials listed above.