Question: 1) The following data are presented for Rocket Company. Working capital $100,000 Total assets 300,000 Retained earnings 40,000 Earnings before interest and taxes 60,000 Market

1) The following data are presented for Rocket Company.

Working capital $100,000

Total assets 300,000

Retained earnings 40,000

Earnings before interest and taxes 60,000

Market value of equity 100,000

Book value of total debt 220,000

Sales 400,000 Z Score

Formula: Z = .012X1 + .014X2 + .033X3 + .006X4 + .010X5

X1 = Working Capital/Total Assets

X2 = Retained Earnings (balance sheet)/Total Assets

X3 = Earnings Before Interest and Taxes/Total Assets

X4 = Market Value of Equity/Book Value of Total Debt

X5 = Sales/Total Assets

Required: a. Compute the Z score for Rocket Company.

b. Considering the Altman model, comment on the likelihood that this firm will experience financial failure.

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