Question: River Cruises is all - equity - financed with 1 0 0 , 0 0 0 shares. It now proposes to issue $ 1 7

River Cruises is all-equity-financed with 100,000 shares. It now proposes to issue $170,000 of debt at an interest rate of 10% and use the proceeds to repurchase 17,000 shares at $10 per share. Profits before interest are expected to be $117,000.
a. What is the ratio of price to expected earnings for River Cruises before it borrows the $170,000? Note: Do not round Intermedlate calculatlons.
Price-earnings ratio
b. What is the ratio after it borrows?
Note: Do not round Intermedlate calculatlons. Round your onswer to 2 deelmal places.
Price-earnings ratio
River Cruises is all-equity-financed with 100,000 shares. It now proposes to

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