Consider Pacific Energy Company and Atlantic Energy, Incorporated, both of which reported earnings of $960,000. Without new projects, both firms will continue to generate earnings of $960,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a return of 13 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 $110,000 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 $210,000 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.)