1 We aim to provide a valuation for Rivian and Nikola in the electric vehicle industry. We plan to use valuation with multiples and valuation with discounted cash method.

2 Valuation with multiples refers to ...

3 DCF method is ..

4 Analysis

QUESTIONS 1. Assuming the company continues its current growth rate, what is the value per share of the companys stock? 2. To verify their calculations, Carrington and Genevieve have hired Josh Schlessman as a consultant. Josh was previously an equity analyst and covered the HVAC industry. Josh has examined the companys financial statements, as well as examining its competitors. Although Ragan, Inc., currently has a technological advantage, his research indicates that other companies are investigating methods to improve efficiency. Given this, Josh believes that the companys technological advantage will last only for the next five years. After that period, the companys growth will likely slow to the industry growth average. Additionally, Josh believes that the required return used by the company is too high. He believes the industry average required return is more appropriate. Under this growth rate assumption, what is your estimate of the stock price? 3. What is the industry average priceearnings ratio? What is the priceearnings ratio for Ragan, Inc.? Is this the relationship you would expect between the two ratios? Why? 4. Carrington and Genevieve are unsure how to interpret the priceearnings ratio. After some head scratching, theyve come up with the following expression for the price earnings ratio: Beginning with the constant dividend growth model, verify this result. What does this expression imply about the relationship between the dividend payout ratio, the required return on the stock, and the companys ROE? 5. Assume the companys growth rate slows to the industry average in five years. What future return on equity does this imply, assuming a constant payout ratio? 6. After discussing the stock value with Josh, Carrington and Genevieve agree that they would like to increase the value of the company stock. Like many small business owners, they want to retain control of the company, so they do not want to sell stock to outside investors. They also feel that the companys debt is at a manageable level and do not want to borrow more money. How can they increase the price of the stock? Are there any conditions under which this strategy would not increase the stock price?