Two companies in the transportation industry had the following information: Required a. Calculate the P/E ratios for

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Two companies in the transportation industry had the following information:

Required

a. Calculate the P/E ratios for both companies and comment on which is more affordable from that perspective.

b. Calculate the dividend payout ratio and dividend yield for both companies and comment on the results.

c. Determine the net free cash flows of both companies. Comment on what these amounts represent.

d. What picture do you have of each company based on the financial information provided and the ratios you have calculated?

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Understanding Financial Accounting

ISBN: 9781119715474

3rd Canadian Edition

Authors: Christopher D. Burnley

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Question Posted: Jan 31, 2023 03:55 AM

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Two companies in the transportation industry had the following information: Required a. Calculate the P/E ratios for

Question:

Basic earnings per share Market price per share Dividends per share Cash flows from operating activities ($ thousands) Net capital expenditures ($ thousands) Company 1 $ 0.87 $ 11.82 $ 0.475 $64,621 $ 6,155 Company 2 $ 0.67 $ 25.26 $ 0.535 $235,786 $75,042

Step by Step Answer:

a Based on the PE ratio Company 1 is more affordable It takes an investment of 1360 to result in company earnings of 100 whereas with Company 2 youd n...View the full answer

Understanding Financial Accounting

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