Question
You are working as a share analyst for investment bank Cabbock and Crown. You have been given the task of analysing the shares of two
You are working as a share analyst for investment bank Cabbock and Crown. You have been given the task of analysing the shares of two companies, Cheniburton Ltd and CondaLeasing Ltd, in order to determine the relative risk and return of each share. Selected figures from the financial statements of each share are presented below:
| Cheniburton Ltd | CondaLeasing Ltd | |
|---|---|---|
| Market price per ordinary share | $12.17 | $9.01 |
| Earnings Per Share (EPS) | $0.57 | $0.57 |
| Ordinary share equity | $194,630,700 | $537,656,800 |
| Number of shares issued | 117,958,000 | 172,880,000 |
a)Calculate the market/book (M/B) ratio for Cheniburton Ltd. Give your answer to 2 decimal places.
M/B ratio for Cheniburton Ltd =
b)Calculate the M/B ratio for CondaLeasing Ltd. Give your answer to 2 decimal places.
M/B ratio for CondaLeasing Ltd =
c)What do these results indicate about Cheniburton Ltd and CondaLeasing Ltd?
| Cheniburton Ltd is expected to provide a higher risk and higher return in the future than CondaLeasing Ltd | |
| CondaLeasing Ltd is expected to provide a higher risk and higher return in the future than Cheniburton Ltd | |
| CondaLeasing Ltd is expected to provide a higher risk but a lower return in the future than Cheniburton Ltd | |
| Cheniburton Ltd is expected to provide a higher risk but a lower return in the future than CondaLeasing Ltd |
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