An investor is considering investing in the long-term bonds and common stock of Companies M and N. Both companies operate in the same industry. In addition, both companies pay a dividend per share of $4 and have a yield of 10 percent on their long- term bonds. Other data for the two companies are as follows:

Compute the debt to equity, interest coverage, price/earnings (P/E), and dividends yield ratios, and comment on the results. (Round computations to one decimal place.) L01

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Company M Total assets $2,400,000 Company N $1,080,000 Total liabilities 1,080,000 594,000 Income before income taxes 288,000 129,600 Interest expense 97,200 53,460 Earnings per share 3.20 5.00 Market price of common stock 40 47.50