Question

Price-Earnings Ratio; Dividend Yield

The table that follows shows the stock price, earnings per share, and dividends per share for three companies for a recent year:

PriceEarnings
per ShareDividends
per Share

Deere & Company (DE)$103.04 $4.83 $2.40

Alphabet (GOOG)792.45 20.91 0.00

The Coca-Cola Company (KO)178.85 1.51 1.40

a. Determine the price-earnings ratio and dividend yield for the three companies. Round to one decimal place. If an amount should be zero, enter in "0".

Price-Earnings RatioDividend Yield

Deere & Company%

Alphabet%

The Coca-Cola Company%

b. Explain the differences in these ratios across the three companies by completing the following:
Deere & Company has the   price-earnings ratio, and is expected to produce shareholder returns through  . Coca-Cola has a   dividend yield and   price-earnings ratio. Alphabet pays   dividend and, thus, has   dividend yield. Alphabet has a   price-earnings ratio.

Answer 1

a.

Computation of Price-earning Ratio &Dividend Yield

	Formula	Degree& Company	Alphabet	Coca-Cola
Price-earning Ratio		21.3	37.9	118.4
Dividend Yield		2.3%	0%	0.7%

b.In case of Price earning Ratio,when the ratio increases it is beneficial to company.The high Price earning Ratio indicates the investors are willing to buy the share of that particular company with a expectation the price of share will rise in future.

From these Three companies Price earning share ratio of Coca-cola is high Price earning ratio, from this we can conclude that the investors are willing to buy its share at high price with an expectation  that the price will go up.

If we come to the Dividend yield the good dividend yield is 4-6%.If the invstors are willing to make a dividend income they can select these percentage dividend yied.

In this particular problem the Degree& Company provide a better dividend yield ratio.Other companies in this only provide poor Dividend yield.So, the investor willing to make a dividend income from these companies can choose Degree & Company.