What is the ratio after it borrows

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Reference no: EM131188013

River Cruises is all-equity-financed with 100,000 shares. It now proposes to issue $270,000 debt at an interest rate of 10% and use the proceeds to repurchase 27,000 shares at $10 per share. Profits before interest are expected to be $127,000.

a. what is the ratio of price to expected earnings for River Cruises before it borrows the $270,000? (Do not round intermediate calculations. Round your answer to 2 decimal places)

price-earnings ____________

b. what is the ratio after it borrows? (Do not round intermediate calculations. Round your answer to 2 decimal places)

price-earnings ratio ____________

Reference no: EM131188013

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