Consider Pacific Energy Company and U.S. Blue chips, Inc., both of which reported earnings of $750,000. Without new projects, both firms will continue to generate earnings of $750,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a 14 percent rate of return.
a. What is the current PE ratio for each company?
b. Pacific Energy Company has a new project that will generate additional earnings of $100,000 each year in perpetuity. Calculate the new PE ratio of the company.
c. U.S. Bluechips has a new project that will increase earnings by $200,000 in perpetuity. Calculate the new PE ratio of the firm.
Recently Asked Questions
- Which one is not a rule for formatting a YouTube video reference? (Points : 1) The video title must be italicized. The author is the actual name and/or screen
- A biologist must make a medium to grow a type of bacteria. The percentage of salt in the medium is given by S=0.01(x^2)(y^2)z, where x,y, and z are amounts in
- Unit IV Scholarly Activity Art Creation and Analysis Your task is to create a piece of art that reflects a text that has some meaning to you. The art can be in