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Consider Pacific Energy Company and Atlantic Energy, Inc., both of which reported earnings of $964,000. Without new projects,

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Answer #1

a) Market value of stocks $ 8,033,333 =964000/12% PE Ratio 8.33 -8033333/964000 b) Market value of stocks $ 8,983,333 =(96400

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Answer #2

{749386DA-2944-4CF7-8714-01390096962A}.png.jpg














Earnings 
630000GIVEN











Perpetual Earnings 
630000











RATE OF Return
11%


























A)FORMULA FOR P/E RATIO =   PRICE / EARNINGS











WE KNOW ONLY EARNINGS WE   DON’T NO THE PRICE SO 1ST WE HAVE TO CALCULATE THAT.






FORMULA FOR PRICE =   C/(r-g)
HERE   "C" IS DIVIDEND... AS IT IS SAID IN QUESTION THAT ALL THE EARNINGS   ARE GIVEN AS DIVIDEND… SO, WE WILL TAKE EARNINGS AS DIVIDEND. AND   "GROWTH" IS NOT GIVEN SO WE WILL TAKE IT AS 0 


PRICE =5727272.73


PE RATIO =9.09



























B)NEW EARNINGS = 100000












 TOTAL EARNINGS = 100000+630000730000NOW THEY ARE GIVING THIS AS DIVIDEND






















FORMULA FOR P/E RATIO =   PRICE / EARNINGS











WE KNOW ONLY EARNINGS WE   DON’T NO THE PRICE SO 1ST WE HAVE TO CALCULATE THAT.






FORMULA FOR PRICE =   C/(r-g)













PRICE =6636363.64













PE RATIO =10.53



























C)NEW EARNINGS = 200000












 TOTAL EARNINGS= 200000+630000830000NOW THEY ARE GIVING THIS AS DIVIDEND






















FORMULA FOR P/E RATIO =   PRICE / EARNINGS











WE KNOW ONLY EARNINGS WE   DON’T NO THE PRICE SO 1ST WE HAVE TO CALCULATE THAT.






FORMULA FOR PRICE =   C/(r-g)





























PRICE =7545454.55













PE RATIO =11.98




























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answered by: S.Sainath
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