Question

1. The following information is given for Hilton for 2001 (in millions):

   Hilton

   Texaco's Bond Ratings

   Altman's Z-score Model

   Total current assets

   $996

   Moody's: Ba

   6.56 x working capital / total assets

   Total current liabilities

   902

   3.26 x retained earnings / total assets

   Total assets

   8,785

   6.72 x EBIT / total assets

   Retained earnings

   168

   1.05 x BV of equity / BV of debt

   Earnings before tax

   250

   = Z-score

   Interest expense

   385

   Failing: below 1.1

   Total stockholders' equity

   1,783

   Gray: 1.1-2.6

   Total liabilities

   7,002

   Healthy: above 2.6

   Altman's working capital Z-score calculation for Hilton is:

   	a.	1.070
   	b.	0.035
   	c.	1.331
   	d.	0.070

1 points

Question 4

1. The Z-score for Hilton in Question 3 is (round to 4 decimal places in calculations):

   	a.	3.148
   	b.	2.381
   	c.	3.248
   	d.	0.886

1 points

Question 5

1. Hilton's Altman's Z-score and bond rating me

   	a.	Texaco is bound to declare bankruptcy with the next 6 months
   	b.	Texaco has high quality bonds & zero credit risk
   	c.	Texaco had a junk bond rating and a failing Z-score
   	d.	Texaco has a healthy Z-score & investment grade rating

Answer 1

see image

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question 5

C : Texaco has a junk bond rating & a failing Z-score