The following summary of the earnings per share, price-earnings (P-E), payout, and dividend yield ratios is available for five years ended December 31 for TransAlta Corporation:

Instructions
(a) What are some possible reasons that TransAlta's price-earnings and dividend payout ratios fell from 121.1 times and 447.7%, respectively, in 2006 to 21.8 times and 65.5% in 2007? What does this mean?
(b) Why do you think TransAlta's price-earnings ratio declined to 21.8 times while its earnings per share improved to $1.53 in 2007?
(c) What are some possible reasons that TransAlta's payout ratio increased in 2010 at a time when its price-earnings ratio declined?
(d) If you were an investor looking for dividend income, would you be happy with TransAlta's dividend policy? Explain.

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Earnings per Share Dividend Yield 2006 2007 2008 2009 2010 S0.22 1.53 1.18 0.90 1.00 P-E Ratio 121.1 times 21.8 20.6 26.1 21.2 Payout Ratio 447.7% 65.6 91.5 129.8 146.3 4.1% 3.4 4.4 4.9 5.5