Question
In: Finance
Consider Pacific Energy Company and Atlantic Energy, Inc., both of which reported earnings of $958,000. Without...
Consider Pacific Energy Company and Atlantic Energy, Inc., both of which reported earnings of $958,000. Without new projects, both firms will continue to generate earnings of $958,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a return of 12 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.) b. Pacific Energy Company has a new project that will generate additional earnings of $108,000 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.) c. Atlantic Energy has a new project that will increase earnings by $208,000 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.)
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Consider Pacific Energy Company and Atlantic Energy, Inc., both of which reported earnings of $969,000. Without...
Consider Pacific Energy Company and Atlantic Energy, Inc., both
of which reported earnings of $969,000. Without new projects, both
firms will continue to generate earnings of $969,000 in perpetuity.
Assume that all earnings are paid as dividends and that both firms
require a return of 12 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.)
b.
Pacific Energy Company has a new...
Consider Pacific Energy Company and Atlantic Energy, Inc., both of which reported earnings of $962,000. Without...
Consider Pacific Energy Company and Atlantic Energy, Inc., both
of which reported earnings of $962,000. Without new projects, both
firms will continue to generate earnings of $962,000 in perpetuity.
Assume that all earnings are paid as dividends and that both firms
require a return of 12 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.)
b.
Pacific Energy Company has a new...
Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $959,000. Without...
Consider Pacific Energy Company and U.S. Bluechips, Inc., both
of which reported earnings of $959,000. Without new projects, both
firms will continue to generate earnings of $959,000 in perpetuity.
Assume that all earnings are paid as dividends and that both firms
require a return of 12 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...
Pacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The...
Pacific Rim Industries is a diversified company whose products
are marketed both domestically and internationally. The company’s
major product lines are furniture, sports equipment, and household
appliances. At a recent meeting of Pacific Rim’s board of
directors, there was a lengthy discussion on ways to improve
overall corporate profitability. The members of the board decided
that they required additional financial information about
individual corporate operations in order to target areas for
improvement.
Danielle Murphy, the controller, has been asked to...
Pacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The...
Pacific Rim Industries is a diversified company whose products
are marketed both domestically and internationally. The company’s
major product lines are furniture, sports equipment, and household
appliances. At a recent meeting of Pacific Rim’s board of
directors, there was a lengthy discussion on ways to improve
overall corporate profitability. The members of the board decided
that they required additional financial information about
individual corporate operations in order to target areas for
improvement.
Danielle Murphy, the controller, has been asked to...
Pacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The...
Pacific Rim Industries is a diversified company whose products
are marketed both domestically and internationally. The company’s
major product lines are furniture, sports equipment, and household
appliances. At a recent meeting of Pacific Rim’s board of
directors, there was a lengthy discussion on ways to improve
overall corporate profitability. The members of the board decided
that they required additional financial information about
individual corporate operations in order to target areas for
improvement.
Danielle Murphy, the controller, has been asked to...
Pacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The...
Pacific Rim Industries is a diversified company whose products
are marketed both domestically and internationally. The company’s
major product lines are furniture, sports equipment, and household
appliances. At a recent meeting of Pacific Rim’s board of
directors, there was a lengthy discussion on ways to improve
overall corporate profitability. The members of the board decided
that they required additional financial information about
individual corporate operations in order to target areas for
improvement.
Danielle Murphy, the controller, has been asked to...
Pacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The...
Pacific Rim Industries is a diversified company whose products
are marketed both domestically and internationally. The company’s
major product lines are furniture, sports equipment, and household
appliances. At a recent meeting of Pacific Rim’s board of
directors, there was a lengthy discussion on ways to improve
overall corporate profitability. The members of the board decided
that they required additional financial information about
individual corporate operations in order to target areas for
improvement.
Danielle Murphy, the controller, has been asked to...
Pacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The...
Pacific Rim Industries is a diversified company whose products
are marketed both domestically and internationally. The company’s
major product lines are furniture, sports equipment, and household
appliances. At a recent meeting of Pacific Rim’s board of
directors, there was a lengthy discussion on ways to improve
overall corporate profitability. The members of the board decided
that they required additional financial information about
individual corporate operations in order to target areas for
improvement.
Danielle Murphy, the controller, has been asked to...
ABC Inc. just reported earnings of $35 million. It has adiscount rate of 8% on...
ABC Inc. just reported earnings of $35 million. It has a
discount rate of 8% on its stock. Assume its returnon new investment is 12%. The company has 1.5 million shares
outstanding. If earnings are expected tohave a perpetual growth rate of 6%, calculate ABC Inc.’s
EPS1.A. $24.73B. $23.33C. $25.20D. $26.13E. None of the options
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