What is the current pe ratio for each company

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Question - Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $961,000. Without new projects, both firms will continue to generate earnings of $961,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a return of 14 percent.

Required -

a. What is the current PE ratio for each company?

b. Pacific Energy Company has a new project that will generate additional earnings of $111,000 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 $211,000 each year in perpetuity. Calculate the new PE ratio of the company.

Reference no: EM132786287

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