Emma Li successfully finished her MBA and now works as the CFO of the Great Lake Industries, a manufacturer of snowmobiles, all-terrain vehicles (ATVs), and neighborhood electric vehicles. To this point, the company has used outside suppliers for various key components of the company's vehicles, including engines. Emma has decided that Great Lake Industries should consider the purchase of an engine manufacturer to allow it to better integrate its supply chain and get more control over engine features. After investigating several possible companies, Emma feels that the purchase of Polaris Engines Inc. is a possibility. She has asked you to analyze Polaris's value.

Polaris Engines Inc. was founded some years ago by a brother and sister, Richard and Kelly Polaris, and has remained a privately owned company. The company manufactures engines for a variety of applications. Polaris has experienced rapid growth because of a proprietary technology that increases the fuel efficiency of its engines with very little sacrifice in performance. The company is equally owned by Richard and Kelly. The original agreement between the siblings gave each 75,000 shares of stock. Emma asked you to value Polaris stock. To accomplish this, you have gathered the following information about some of Polaris's competitors that are publicly traded:

EPS DPS Price ROE r Blue Motors Corp. $1.19 $0.19 $16.32 10.00% 12.00% Continental Motors Inc. 1.26 0.55 13.94 12.00 17.00 Nautilus Engines -0.27 0.57 23.97 N/A 13.00 Industry average $0.73 $0.44 $18.08 11.00% 14.00%