Check my workCheck My Work button is now enabled

Item 13

Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $964,000. Without new projects, both firms will continue to generate earnings of $964,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a return of 12 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.)
b.	Pacific Energy Company has a new project that will generate additional earnings of $114,000 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.)
c.	U.S. Bluechips has a new project that will increase earnings by $214,000 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.)