Question: The following table shows some financial data for two companies: A B Total Asset $1,552.10 $1,565.70 EBITDA -60 70 Net Income + interest -80 24

The following table shows some financial data for two companies:

A B

Total Asset $1,552.10 $1,565.70

EBITDA -60 70

Net Income + interest -80 24

Total Liabilities 814 1537.10

1. Calculate which has the higher probability of default.

Use the formula shown in Section 23-4 to calculate which has the higher probability of default.

2. What variables are required to use a market-based approach to calculate the probability that a company will default on its debt"

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