Use the following financial statements to answer questions (a) to (c):

iABC Ltd Balance Sheet (in millions of dollars)
Assets		Liabilities
Cash	$400	Accounts Payable	$300
Accounts Receivables	1,750	Accrued Taxes	200
Inventories	1,250	Bills Payable	900
Fixed Assets	5,000	Long-term debt	3,000
		Equity	4,000
Total	$8,400	Total	$8,400

iABC Ltd Income Statement (in millions of dollars)
Sales Revenue	$5,000
Cost of Goods Sold	3,500
Interest	1,500
Taxes @ 30%

Consider the Altman's Z-score.

Where WC = Working Capital, TA = Total Assets, RE = Retained Earnings,

MVE= Market Value of Equity and BVLTD = Book Value of Long-Term Debt.

1. Evaluate Altmans discriminant function for iABC Ltd if the firm pays tax at 30%, has a 45% dividend payout ratio and the market value of equity is equal to the book value.
2. Should you approve iABC Ltds application to your bank for $3,000,000 for a capital expansion loan? Justify your answer.
3. What is the critical variable in the Altmans Z-score for iABC Ltd? What is underlying this variable? Justify your answer.