Z-score = [1.2*(WK/TA)]+[1.4*(RE/TA)]+[3.3*(EBIT/TA)]+[0.6*(MVE/TL)]+[0.99*(Sales/TA)]
CA=$78,719; CL=$24,911; TL=$58,067; TA=$121,652; RE=$19,396;
# of Shares issued and outstanding= 5,029; Price per share=$30.53; Sales=$49,247; EBIT=$12,660;
The Z-score for SOPHOPHOBIA is calculated as 3.083.
The company has a large amount of liquid investments reported as current assets.What would be the effect on the company's Z-score of selling $30,000 of investments and using the proceeds to pay $10,000 of dividends and $20,000 of long-term debt? [That is, recalculate the Z-score and comment on it. If it has changed, explain why]. Assume that the company's market value would decrease by $30,000(in addition to any balance sheet effects).Also assume that there are no income statement effects.
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