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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
PriceEarnings Ratio Consider Pacific Energy Company and Atlantic Energy, Inc., both of which reported earnings of $ Without new projects, both firms will continue to generate earnings of $ in perpetuity. Assume that all earnings are paid as dividends and that both firms require a return of 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 $ each year in perpetuity. Calculate the new PE ratio of the company.
c Atlantic Energy has a new project that will increase earnings by $ in perpetuity. Calculate the new PE ratio of the firm.
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