River Cruises is allequityfinanced with 100,000 shares. It now proposes to issue $300,000 of debt at an interest rate of 12% and use the proceeds to
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Just need part B . thanksScreen Shot 2019-09-23 at 1.13.07 PM.png

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River Cruises is all—equity—financed with 100,000 shares. It now proposes to issue $300,000 of debt at an interest rate of 12% and use
the proceeds to repurchase 30,000 shares at $10 per share. Profits before interest are expected to be $130,000. a. What is the ratio of price to expected earnings for River Cruises before it borrows the $300,000? (Do not round intermediate
calculations. Round your answer to 2 decimal places.) Prioe-eamings ratio b. What is the ratio after it borrows? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Prioe-eamings ratio I I

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