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QUESTION 1: VALUATION OF SHARES d Jenny Thermal systems founded nine years ago by brother and sister sysi manufactures and the energy Ragan. The company and commercial technology that Jenny. The original has rapid growth because Carrington and wishes to sell the efficiency of its systems. The company is owned equally by event that either agreement between the siblings gave each shares. In the price their shares, they first have to be offered to the other at a discounted value Although neither sibling wants to at they have decided they should the sell any shares presen they have gathered in the company for financial planning purposes. To accomplish following information about their main competitors ROE (56) Required DPS Share Price (S) rate EPS (Gents) 15.19 13 0.16 0.82 Arctic Cooling 12.49 12 0.52 14 1.32 National H&C 48.60 11.25 0.54 -0.47 13 Expert Cool 25.43 0.42 0.56 Indust Last year, Ragan had an EPs of s4,32 and paid a dividend to Carrington and Jenny of 54,000 each The company also had a return on equity of 25%. The siblings believe a required rate return for of the company of 20% is appropriate Required should be inferred from 1. Assuming the company continues its current growth rate (growth rate the data given) into the infinite period, what is the share price of the company? marks) (7 2. To verify their calculations, Carrington and Jenny have hired Josh Jobby, a consultant. Josh as previously an equity analyst, and he has covered the Heating and Cooling Industry. Josh has examined the company's financial statements as well as those of its competitors. Although Ragan currently has a technological advantage, Josh research indicates that Ragan's competitors are investigating other methods to improve efficiency. Given this, Josh believes that Ragan's technological advantage wi ast for only the next five years. After that period the company's growth is likely to slow to the industry average. Additional ly, Josh believes that the required return the company uses is too high He believes the industry average required return is more appropri Under Josh's assumptions, what is the estimated share price? (8 marks) What is the industry average price-earnings ratio? What is Ragan's price-earnings ratio based on Josh's estimate above in part (2)? Comment on any differences and explain w hy they may exist? (10 marks) 4. After discussion with Josh, Carrington and Jenny agree that they would like to increase the value of the company's equity. Like many small business owners, they want to retain control