Calculate the new pe ratio of the firm

Assignment Help Financial Management

Reference no: EM132024299

Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $951,000. Without new projects, both firms will continue to generate earnings of $951,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a return of 14 percent.

a. What is the current PE ratio for each company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

PE ratio ______ times

b. Pacific Energy Company has a new project that will generate additional earnings of $101,000 each year in perpetuity. Calculate the new PE ratio of the company. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

PE ratio ______ times

c. U.S. Bluechips has a new project that will increase earnings by $201,000 in perpetuity. Calculate the new PE ratio of the firm. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

PE ratio _______ times

Reference no: EM132024299

Questions Cloud

Calculated annual growth rate : Calculate the intrinsic value of the stock using an 8% required rate of return and the calculated annual growth rate.

Estimate the enterprise value of heavy metal : The free cash flows are expected to grow at the industry average of 3.7 % per year. Estimate the enterprise value of Heavy Metal.

What is general industries expected current share price : what is General Industries' expected current share price?

What does bill believe the inflation rate : Bill Bernanke thinks total real return on investment will be only 8.7 percent. What does Bill believe the inflation rate will be over the next year?

Calculate the new pe ratio of the firm : What is the current PE ratio for each company? Calculate the new PE ratio of the firm.

How studying and gaining an understanding of finance : Explain how studying and gaining an understanding of finance can help you as an individual. Please help by explaining in detail

Earnings per share-eps for the recession-expansion scenarios : Earnings per share, EPS, for the recession, normal, and expansion scenarios before any debt is issued are $ , $ , and $ , respectively

Firm cost of equity based on the CAPM approach : The expected return on the market is 12%, then what would be the firm's cost of equity based on the CAPM approach?

The sarbanes-oxley act requires : The Sarbanes-Oxley Act requires all of the following EXCEPT ________.

User Account

All Pages