You started work with an investment bank and your first task was to invest in one of the two shortlisted companies listed. Your assistant has compiled the following data on two companies:
|
Company A
|
Company B
|
|
Return on assets
|
10.9%
|
9.0%
|
|
Return on equity
|
15.4%
|
14.3%
|
|
Dividend payout ratio
|
0.35
|
0.3
|
|
Required return on equity
|
13.0%
|
12.4%
|
|
Weighted average cost of capital
|
11.8%
|
11.7%
|
In your opinion, which company stock is the most attractive and why? (Please show your calculations)