River Cruises is all-equity-financed with 100,000 shares. It now proposes to issue $240,000 of debt at an interest rate of 12% and use the proceeds to repurchase 24,000 shares at $10 per share. Profits before interest are expected to be $124,000.

a.What is the ratio of price to expected earnings for River Cruises before it borrows the $240,000?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

b.What is the ratio after it borrows?(Do not round intermediate calculations. Round your answer to 2 decimal places.)