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# Consider Pacific Energy Company and US Bluechips Inc both of which reported earnings of \$957000 Without new projects both firms will continue to generate earnings of \$957000 in perpetuity

 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 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

Apr 11 2020 View more View Less