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27. Price-Earnings Ratio Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $800,000. Without new projects, both firms will continue
27. Price-Earnings Ratio Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $800,000. Without new projects, both firms will continue to gener- ate earnings of $800,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a 15 percent rate of return. a. What is the current PE ratio for each company? b. Pacific Energy Company has a new project that will generate additional earnings of $100,000 each year in perpetuity. Calculate the new PE ratio of the company
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