Question

Whirlpool corporation(WHR) earns $4.80 per share. Today the stock is trading at $234.81. The company pays an annual dividend of $17.07. Calculate (a) the price-earning ratio (rounded to the nearest whole number) and (b) the yield on the stock (to the nearest tenth percent).

Answer 1

The price-earnings ratio of the stock is approximately 49 and the yield is approximately 7.3%.

Step-by-step explanation:

a) To calculate the price-earnings ratio, we need to divide the stock's price by its earnings per share. The price-earnings ratio is given by:

• Price-earnings ratio = Stock price / Earnings per share

Using the given information:

• Stock price = $234.81
• Earnings per share = $4.80

Plugging in the values into the formula:

• Price-earnings ratio = $234.81 / $4.80
• Price-earnings ratio ≈ 48.88 ≈ 49

Therefore, the price-earnings ratio is approximately 49.

b) To calculate the yield on the stock, we need to divide the annual dividend per share by the stock's price. The yield on the stock is given by:

• Yield on the stock = (Annual dividend per share / Stock price) × 100

Using the given information:

• Annual dividend per share = $17.07
• Stock price = $234.81

Plugging in the values into the formula:

• Yield on the stock = ($17.07 / $234.81 ) × 100
• Yield on the stock ≈ 7.26% ≈ 7.3%

Therefore, the yield on the stock is approximately 7.3%.