An investor is considering investing in the long-term bonds and common stock of Companies M and N. Both firms operate in the same industry. Both also pay a dividend per share of $8 and have a yield of 10 percent on their long-term bonds. Other data for the two firms are as follows:

Compute the debt to equity, interest coverage, and price/earnings (P/E) ratios, as well as the dividends yield, and comment on the results. (Round computations to one decimalplace.)

Transcribed Image Text:

Total assets Total liabilities Income before income taxes Interest expense Earnings per share Market price of common stock Company M Company N S4,800,000 $2,160,000 2,160,000 1,188,000 259,200 106,920 10.00 95 576,000 194,400 6.40 80