Consider pacific energy company and atlantic energy inc both of which reported earnings of $790,000. Without new projects, both firms will continue to generate earnings of $790,000 in perpetuity. assume that all earnings are paid as dividends and that both firms require a return of 11 percent:

a. what is the current PE ratio for each company?

b. pacific energy company has a new project that will generate additional earnings of $175,000 each year in perpetuity. calculate the new PE ratio of the company.

c. Atlantic energy has a new project that will increase earnings by $350,000 in perpetuity. calculate the new PE ratio of the company.