Price$-$Earnings Ratio 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 perpetu$-$

ity. Calculate the new PE ratio of the firm.