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## Finance

 Basic Finance Corporate Finance Financial Management Financial Econometrics Portfolio Management Risk Management Public Finance Business Law & Ethics

Consider Pacific Energy Company and U. S. Bluechips, Inc. both of which reported earnings of \$750000. Without new projects, both firms will continue to generate earnings of \$750000 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 \$100000 each year in perpetuity. find out the new PE ratio of the company.

c. U. S. Bluechips has a new project that will increase earnings by \$200000 in perpetuity. find out the new PE ratio of the firm

Basic Finance, Finance

• Category:- Basic Finance
• Reference No.:- M947352

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