Chapter 9 Stock Valuation at Ragan Engines Input area: SharesownedbyeachsiblingRaganEPSDividendtoeachsiblingRaganROERaganrequiredreturn$$150,0005.35320,00021%18% Output area: 1) Total earnings Payout ratio Retention ratio Growth rate Total dividends next year Total equity value \begin{tabular}{|l|} \hline \\ \hline \\ \hline \\ \hline \\ \hline \end{tabular} Value per share 2) Industry EPS Industry payout ratio Industry retention ratio Industry growth rate Year 1 2 3 4 5 6 \begin{tabular}{|l|} \hline \\ \hline \\ \hline \\ \hline \end{tabular} Stock value in Year 5 Total stock value today Value per share 3) Industry PE Ragan PE (original assumption) Ragan PE (revised assumption) Stock price implied by industry PE Total dividends \begin{tabular}{|l|} \hline \\ \hline \\ \hline \\ \hline \\ \hline \\ \hline \\ \hline \end{tabular} 4) Total earnings Cash cow value Percentage not attributable to growth opportunities Percentage attributable to growth opportunities 5) ROE Chapter 9 Stock Valuation at Ragan Engines Input area: SharesownedbyeachsiblingRaganEPSDividendtoeachsiblingRaganROERaganrequiredreturn$$150,0005.35320,00021%18% Output area: 1) Total earnings Payout ratio Retention ratio Growth rate Total dividends next year Total equity value \begin{tabular}{|l|} \hline \\ \hline \\ \hline \\ \hline \\ \hline \end{tabular} Value per share 2) Industry EPS Industry payout ratio Industry retention ratio Industry growth rate Year 1 2 3 4 5 6 \begin{tabular}{|l|} \hline \\ \hline \\ \hline \\ \hline \end{tabular} Stock value in Year 5 Total stock value today Value per share 3) Industry PE Ragan PE (original assumption) Ragan PE (revised assumption) Stock price implied by industry PE Total dividends \begin{tabular}{|l|} \hline \\ \hline \\ \hline \\ \hline \\ \hline \\ \hline \\ \hline \end{tabular} 4) Total earnings Cash cow value Percentage not attributable to growth opportunities Percentage attributable to growth opportunities 5) ROE