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Problem. 01: MNO Inc., a publicly traded manufacturing firm, has provided the following financial information...

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Finance

Problem. 01: MNO Inc., a publicly traded manufacturing firm, has provided the following financial information in its application for a loan. Assets $ Liabilities and equity $ Cash 20 Accounts payable 30 Accounts receivables 90 Notes payable 90 Inventory 90 Accruals 30 Long-term debt 150 Plant and equipment 500 Equity 400 Total assets 700 Total liabilities and equity 700 Also assume sales = $500, cost of goods sold = $360, taxes = $56, interest payments = $40 and net income = $44; the dividend payout ratio is 50 per cent and the market value of equity is equal to the book value. (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? Solution:

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