Chapter 11, Problem 14E

To determine

Price Earnings Ratio:

It shows the amount a shareholder pays for every $1 of its dividend. It is determined by dividing price of share by dividend.
The formula to calculate price earnings ratio is,

$\text{Price-earnings}\text{ratio}=\frac{\text{Market}\text{value}\text{of}\text{each}\text{share}}{\text{Earnings}\text{per}\text{share}}$

Earnings per Share:

Earnings per share are the amount received by the shareholders of the company on the each share of the company.

To compute: Price earnings ratio and identify which one is undervalued.