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Using a Modified Discriminant Function Similar to Altman's, Burger Bank

Question 1

Multiple Choice

Using a modified discriminant function similar to Altman's, Burger Bank estimates the following coefficients for its portfolio of loans: Z = 1.4X1 + 1.09X2 + 1.5X3
Where X1 = debt to asset ratio; X2 = net income and X3 = dividend payout ratio.
What is the Z-score if the debt to asset ratio is 40 percent, net income is 12 percent, and the dividend payout ratio is 60 percent?


A) 1.59.
B) 1.48.
C) 1.36.
D) 1.28.
E) 1.20.

Correct Answer:

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