Required:

Calculate the following for each company and evaluate their relative performance. For (1) below, express your answers as percentages with three decimal places; for (2) and (3) below, keep your answers with two decimal places.

1. (1) Calculate the Dividend Yield for each company. (6 marks)

2. (2) Calculate the Earnings per Share for each company. (6 marks)

3. (3) Explain what a Price-to-Earnings (P/E) ratio measures and calculate the P/E ratio for each company. (6 marks)

4. (4) Based on your analysis above, which company would you recommend for investing purpose? Why? (7 marks)

Selected financial information about two competing companies in the Food and Grocery industry, Fresh Produce and Whole Foods, are shown as follows: Fresh Produce Whole Foods Pre-tax income ($ millions) 60 125 Annual common dividends paid ($ millions) 4.5 13 Annual preferred dividends paid ($ millions) 6 9 Number of common shares outstanding (millions) 5 6.5 Current market price per share ($) 85 50 Analysts forecasts also reveal that the earnings of Fresh Produce and Whole Foods are expected to grow next year by 15% and 25%, respectively. Corporate income tax is 30%