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

question 74

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.

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Definitions:

Monopolies

Market structures characterized by a single seller controlling a large portion of the market and the lack of viable competition.

Long-run Equilibrium

A state in which all factors of production and market forces are in balance, with no external pressures prompting change.

P = MR

An equality indicating that a firm's price (P) is equal to its marginal revenue (MR), often associated with perfect competition and profit maximization strategies.

MC = ATC

A condition where the Marginal Cost of producing one more unit is exactly equal to the Average Total Cost, typically representing the point of productive efficiency.