Home / Questions / Consider Pacific Energy Company and US Bluechips Inc both of which reported earnings of $9...
Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $957,000. Without new projects, both firms will continue to generate earnings of $957,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a return of 14 percent.
a.
What is the current PE ratio for each company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
PE ratio
7.14
times
b.
Pacific Energy Company has a new project that will generate additional earnings of $107,000 each year in perpetuity. Calculate the new PE ratio of the company. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
PE ratio
times
c.
U.S. Bluechips has a new project that will increase earnings by $207,000 in perpetuity. Calculate the new PE ratio of the firm. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
PE ratio
times
I need the answer to b and c.
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