With declining demand and sales. the last several years have been challenging in the global auto industry. You are interested in better understanding the performance and valuation of major global companies in the industry. The following table presents net income for the year and shareholders' equity and market value at the end o f each fiscal year for four global auto companies.

Required

a. Comment on changes in net income and book values of each year.

b. Compute the price-earnings (P/E) ratios and price-to-book (P/B) ratios for each year.

c. Compute an average of price-earnings (P/E) ratios and price-to-book (P/B) ratios for each year.

d. Comment on the companies' P/E ratios over time. Are there any unusually high or low P/E ratios? If so, why? Comment on the average over time.

e. Why would the P/8 ratios in the automotive industry generally be higher than 1? Are there any unusually high or low P/B ratios? If so, why? Comment on the companies P/B ratios over time. Comment on the average over time.

f. Compare the average P/E and P/B ratios for the pharmaceutical companies from Example 15,23 in the text with those in the auto industry.

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Fiscal Year Measure {U.S dollars in milions) 2015 Company 2014 2016 Ford Motor Company – U.S. $ 7.373 $ 4,596 $ 1,231 Net income Book va ue of common 24,438 29.170 28,642 stockho ders equity 54,920 47.342 Market value of common stock 58,556 General Motors Company – U.S 3,949 9,427 Net income 9,687 Book value of common 35,457 39,871 43,836 stockho ders equity Market value of common stock 56,090 52,926 53, 199 Net income Honda Motor Company – Japan 6,074 3,059 4,241 Book value of common 61,600 59,184 60 032 stockho ders equ ty 58,863 Market value of common stock 64,003 49 632 Daimler AG – Germany Net income 8,940 9 157 8 975 Book value of common 53,250 58,218 61,000 stockho ders' equity Market value of common stock 89,984 79,641 90,215