Consider Pacific Energy Company and U S Bluechips, Inc , both of which reported earnings of $958,000 Without new projects, both firms will continue to generate earnings of $958,000 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 $108,000 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 $208,000 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 )

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Posted on Oct 06, 2024

Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $958,000. Without new projects, both firms will continue to generate earnings

Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $958,000. Without new projects, both firms will continue to generate earnings of $958,000 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 $108,000 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 $208,000 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.)