Consider Pacific Energy Company and Atlantic Energy, Inc , both of which reported earnings of $969,000 Without new projects, both firms will continue to generate earnings of $969,000 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 $119,000 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 Atlantic Energy has a new project that will increase earnings by $219,000 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 )

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Posted on Oct 02, 2024

Consider Pacific Energy Company and Atlantic Energy, Inc., both of which reported earnings of $969,000. Without new projects, both firms will continue to generate earnings

Consider Pacific Energy Company and Atlantic Energy, Inc., both of which reported earnings of $969,000. Without new projects, both firms will continue to generate earnings of $969,000 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 $119,000 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.	Atlantic Energy has a new project that will increase earnings by $219,000 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.)