Chapter 9, Problem 9.22E

To determine

(a)

Price earnings ratio P/E ratio:

It indicates the amount an investor can expect to invest in a company in order to receive one dollar of company's earnings. It shows the future prospects of the investment.

  $\text{Price Earnings ratio=}\frac{\text{Market value of share }}{\text{Earning per share}}$

Dividends yield:

It is the estimation of dividend on return of stock investment.

  $\text{Dividends yield=}\frac{\text{Annual dividend}}{\text{share price}}$

To calculate:

Price earnings ratio and dividend yield for the three companies.

To determine

(b)

Price earnings ratio P/E ratio:

It indicates the amount an investor can expect to invest in a company in order to receive one dollar of company's earnings. It shows the future prospects of the investment.

Dividends yield:

It is the estimation of dividend on return of stock investment.

To explain:

Differences in price earnings ratio and dividend yield across three companies.