Chapter 8 Stock Valuation at Ragan, Inc. Input area: Shares owned by each sibling Ragan EPS Dividend to each sibling Ragan ROE Ragan required return Artic Cooling, Ino. National Heating \& Cooling Expert HVAC Corp. Industry average 50,000 5 3.15 45,000 17% 14% Expert EPS wlo write-off Output area: 1) Total earnings Retenson ratio Growth rate Current dividend per share Dividend per share next year $1.10 Value per share 2) Industry EPS Industry payout ratio Industry retenson raso $$$315.0000.7112.14%0.901.01 industry growth rate Year 1 2 3 4 5 6 Dividend 1.01 1.13 1.27 1.42 1.60 1.73 Stock value in Year 5 $53.38 Stock price today 3) Industry PE Ragan PE (original assumption) Ragan PE (revised assumption) Stock price implied by industry PE 5) ROE