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Price - Earnings Ratio Consider Pacific Energy Company and Atlantic Energy, Inc., both of which reported earnings of $ 7 2 0 , 0 0

Price-Earnings Ratio Consider Pacific Energy Company and Atlantic Energy, Inc., both of which reported earnings of $720,000. Without new projects, both firms will continue to generate earnings of $720,000 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 $150,000 each year in perpetuity. Calculate the new PE ratio of the company.
c. Atlantic Energy has a new project that will increase earnings by $300,000 in perpetuity. Calculate the new PE ratio of the firm.
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