P 125% Zoom T Insert Table Chart Text Shape Media Comment View Add Page Collaborate Format Dacument Text Ryan International In the world of skateboard attire, instinct and marketing savvy are prerequisites to success. CASE* Update Mongy Ellis had both. During 2020, his international skatehoarding company, Ryan, rocketed to Style Layout More $900 million in sales after 10 years in business. IIis fashion line covered the skateboarders from Font head to toe with huts, shirts, pants, shorts, sweatshirts, socks, and shoes. In L.A., there was a Times New Roman Ryan shop every five or six blocks, each featuring a different color. Some shops showed the Regular 12 pt entire linc in mauve, and others featured it in canary yellow. B T Ryan had made it. The company's historical growth was so spectacular that no one could Character Styles None have predicted it. However, securities analysts speculated that Ryan could not keep up the pace, Text Color They wanted that competition is fierce in the fud fashion industry and that the firm might cncounter little or no growth in the future. They estimated that stockholders also should expect no growth in future dividends. Spacing 2.0 - Double Contrary to the conservative securities analysts, Moogy Ellis feels that the company could maintain a constant annual growth rate in dividends per share of 9.5% in the future, or possibly > Bullets & Lists None 13% for the next 2 years and 9.5% thereafter. Ellis bused his estimates on un established long- Drop Cap A term expansion plan into European and Latin American markets. Venturing into these markets was expected to cause the risk of the firm, as measured by the beta on its stock, to increase immediately from 1.1 to 1.25. In preparing the long-term financial plan, Ryan's chief financial officer has assigned a junior financial analyst, Brad Harris, to evaluate the firm's current stock price. He has asked Brud to consider the conscrvative predictions of the securities analysts and the aggressive predictions. R 125% Zoom 1 Insert Table Chart Text Shape Media Comment View Add Page Collaborate Format Dacument Text CASE* Update Style Layout More Mark has compiled these 2020 financial data to aid his analysis: Font Data item 2020 value Times New Roman Earnings per share (LPS) $4.13 Regular 12 pt B T Price per share of common stock $39.00 Character Styles None Book value of common stock equity $60,000,000 3,000,000 Total common shares outstanding Text Color Common stock dividend per share $2.05 Data Points Bela.b Required Rem X Spacing 2.0 - Double 0 0 4.5% > Bullets & Lists None .25 6.75% Drop Cap A .S 9% .75 11.25% 1 13.5% 1.25 15.75% 1.5 125% Zoom Add Page View T Insert Table Chart Text Shape Media Comment Collaborate Format Document Text CASE 12 To Do a. What is the firm's current book valuc per share? Style Layout More b. What is the firm's current P/E ratio? Font c. (1) What is the current required return for Ryan stock (use CAPM)? Times New Roman (2) What will be the new required return for Ryan stock assuming that they cxpand into Bold Italic 11 pt. European and Latin American markets as planned (usc CAPM)? B UJ S d. If the securities analysts are correct and there is no growth in future dividends, what will be Character Styles None the value per share of the Ryan stock? (Note: use the new required relut on the company's Text Color stock here) c. (1) If Moogy Ellis's predictions are correct, what will be the value per share of Ryan's stock if the firm maintains a constant annual 9.5% growth rate in future dividends? (Note: Spacing 2.0 - Double Continue to use the new required return here.) (2) If Moogy Ellis's predictions are correct, what will be the value per share of Ryan's stock > Bullets & Lists None if the firm maintains a constant annual 13% growth rute in dividends per share over the Drop Cap A next 2 years and 9.5% thercatter? (Note: Use the new required return here.) f. Compare the current (2020) price of the stock and the stock values found in parts a, d, and e. Discuss why these values may differ. Which valuation method do you believe most clearly represents the true value of the Ryan stock? ? P 125% Zoom T Insert Table Chart Text Shape Media Comment View Add Page Collaborate Format Dacument Text Ryan International In the world of skateboard attire, instinct and marketing savvy are prerequisites to success. CASE* Update Mongy Ellis had both. During 2020, his international skatehoarding company, Ryan, rocketed to Style Layout More $900 million in sales after 10 years in business. IIis fashion line covered the skateboarders from Font head to toe with huts, shirts, pants, shorts, sweatshirts, socks, and shoes. In L.A., there was a Times New Roman Ryan shop every five or six blocks, each featuring a different color. Some shops showed the Regular 12 pt entire linc in mauve, and others featured it in canary yellow. B T Ryan had made it. The company's historical growth was so spectacular that no one could Character Styles None have predicted it. However, securities analysts speculated that Ryan could not keep up the pace, Text Color They wanted that competition is fierce in the fud fashion industry and that the firm might cncounter little or no growth in the future. They estimated that stockholders also should expect no growth in future dividends. Spacing 2.0 - Double Contrary to the conservative securities analysts, Moogy Ellis feels that the company could maintain a constant annual growth rate in dividends per share of 9.5% in the future, or possibly > Bullets & Lists None 13% for the next 2 years and 9.5% thereafter. Ellis bused his estimates on un established long- Drop Cap A term expansion plan into European and Latin American markets. Venturing into these markets was expected to cause the risk of the firm, as measured by the beta on its stock, to increase immediately from 1.1 to 1.25. In preparing the long-term financial plan, Ryan's chief financial officer has assigned a junior financial analyst, Brad Harris, to evaluate the firm's current stock price. He has asked Brud to consider the conscrvative predictions of the securities analysts and the aggressive predictions. R 125% Zoom 1 Insert Table Chart Text Shape Media Comment View Add Page Collaborate Format Dacument Text CASE* Update Style Layout More Mark has compiled these 2020 financial data to aid his analysis: Font Data item 2020 value Times New Roman Earnings per share (LPS) $4.13 Regular 12 pt B T Price per share of common stock $39.00 Character Styles None Book value of common stock equity $60,000,000 3,000,000 Total common shares outstanding Text Color Common stock dividend per share $2.05 Data Points Bela.b Required Rem X Spacing 2.0 - Double 0 0 4.5% > Bullets & Lists None .25 6.75% Drop Cap A .S 9% .75 11.25% 1 13.5% 1.25 15.75% 1.5 125% Zoom Add Page View T Insert Table Chart Text Shape Media Comment Collaborate Format Document Text CASE 12 To Do a. What is the firm's current book valuc per share? Style Layout More b. What is the firm's current P/E ratio? Font c. (1) What is the current required return for Ryan stock (use CAPM)? Times New Roman (2) What will be the new required return for Ryan stock assuming that they cxpand into Bold Italic 11 pt. European and Latin American markets as planned (usc CAPM)? B UJ S d. If the securities analysts are correct and there is no growth in future dividends, what will be Character Styles None the value per share of the Ryan stock? (Note: use the new required relut on the company's Text Color stock here) c. (1) If Moogy Ellis's predictions are correct, what will be the value per share of Ryan's stock if the firm maintains a constant annual 9.5% growth rate in future dividends? (Note: Spacing 2.0 - Double Continue to use the new required return here.) (2) If Moogy Ellis's predictions are correct, what will be the value per share of Ryan's stock > Bullets & Lists None if the firm maintains a constant annual 13% growth rute in dividends per share over the Drop Cap A next 2 years and 9.5% thercatter? (Note: Use the new required return here.) f. Compare the current (2020) price of the stock and the stock values found in parts a, d, and e. Discuss why these values may differ. Which valuation method do you believe most clearly represents the true value of the Ryan stock