CFA Examination Level II Westfield Capital Management Company?s equity investment strategy is to invest in companies with low price-to-book ratios, while taking into account differences in solvency and asset utilization. Westfield is considering investing in the shares of either Jerry?s Department Stores (JDS) or Miller Stores (MLS). a. Calculate each of the following ratios for both JDS and MLS. Use only the financial data in Table 8. Show your work. (1) Price-to-book ratio (2) Total-debt-to-equity ratio (3) Fixed-asset utilization (turnover) Litchfield Chemical (LCC) Aminochem (AOC) Current stock price $50 $30 Shares outstanding (millions) 10 20 Projected earnings per share (fiscal 1996) $4.00 $3.20 Projected dividend per share (fiscal 1996) $0.90 $1.60 Projected dividend growth rate 8% 7% Stock beta 1.2 1.4 Investors? required rate of return 10% 11% Balance sheet data (millions) Balance sheet data (millions) Balance sheet data (millions) Long-term debt $100 $130 Stockholders? equity $300 $320 JERRY?S DEPARTMENT STORES AND MILLER STORES: SELECTED FINANCIAL DATA AT MARCH 31, 1997 (IN MILLIONS EXCEPT PER-SHARE DATA) JERRY?S DEPARTMENT STORES AND MILLER STORES: SELECTED FINANCIAL DATA AT MARCH 31, 1997 (IN MILLIONS EXCEPT PER-SHARE DATA) JERRY?S DEPARTMENT STORES AND MILLER STORES: SELECTED FINANCIAL DATA AT MARCH 31, 1997 (IN MILLIONS EXCEPT PER-SHARE DATA) JDS MLS Sales $21,250 $18,500 PP&E $5,700 $5,500 Short-term debt $0 $1,000 Long-term debt $2,700 $2,500 Common equity $6,000 $7,500 Issued and outstanding shares as of 3/31/97 250 400 Per-share market price on 5/30/97 $51.50 $49.50 JERRY?S DEPARTMENT STORES: DATA EXTRACTED FROM MARCH 31, 1997, FINANCIAL STATEMENT FOOTNOTES
Calculate each of the following ratios for both JDS and MLS. Use only the financial data in Table 8....
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