Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported
ID: 2660443 • Letter: C
Question
Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $755,000. Without new projects, both firms will continue to generate earnings of $755,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a 19 percent rate of return.
What is the current PE ratio for each company? (Round your answers to 2 decimal places. (e.g., 32.16))
Pacific Energy Company has a new project that will generate additional earnings of $116,000 each year in perpetuity. Calculate the new PE ratio of the company. (Round your answer to 2 decimal places. (e.g., 32.16))
U.S. Bluechips has a new project that will increase earnings by $204,000 in perpetuity. Calculate the new PE ratio of the firm. (Round your answer to 2 decimal places. (e.g., 32.16))
Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $755,000. Without new projects, both firms will continue to generate earnings of $755,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a 19 percent rate of return.
Explanation / Answer
Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $755,000. Without new projects, both firms will continue to generate earnings of $755,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a 19 percent rate of return.
What is the current PE ratio for each company? (Round your answers to 2 decimal places. (e.g., 32.16))
Pacific Energy Company has a new project that will generate additional earnings of $116,000 each year in perpetuity. Calculate the new PE ratio of the company. (Round your answer to 2 decimal places. (e.g., 32.16))
U.S. Bluechips has a new project that will increase earnings by $204,000 in perpetuity. Calculate the new PE ratio of the firm. (Round your answer to 2 decimal places. (e.g., 32.16))
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