What is ratio of price to expected earnings for river cruise, Financial Accounting

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What is ratio of price to expected earnings for river cruise

Problem

River Cruises is all-equity-financed with 100,000 shares. It now proposes to issue $260,000 of debt at an interest rate of 12% and use the proceeds to repurchase 26,000 shares at $10 per share. Profits before interest are expected to be $126,000.

i. What is the ratio of price to expected earnings for River Cruises before it borrows the $260,000?

ii. What is the ratio after it borrows?

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Financial Accounting: What is ratio of price to expected earnings for river cruise

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Financial Accounting: What is ratio of price to expected earnings for river cruise

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