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

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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