Question: (a) What is the Altman discriminant function value for MNO Inc.? Recall that: Net working capital = current assets minus current liabilities Current assets =

(a) What is the Altman discriminant function value for MNO Inc.? Recall that:

Net working capital = current assets minus current liabilities Current assets = cash + accounts receivable + inventories Current liabilities = accounts payable + accruals + notes payable EBIT = revenues - cost of goods sold - depreciation

Taxes = (EBIT - interest)(tax rate) Net income = EBIT - interest - taxes Retained earnings = net income (1 - dividend payout ratio)

(b) Should you approve MNO Inc.'s application to your bank for a $500 capital expansion loan?

(c) Would the discriminant function change for firms in different industries? What are the implications for the use of these types of models by FIs?

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