***PLEASE SHOW ALL WORK***

A B C D E F 1 Background information 2 Anna has been talking with the company's directors about the future of Frentheway Farm Equipment (FFE). The 3 company has been using outside suppliers for various key components of the company's farm equipment, including 4 engines. Anna has decided that FFE should consider the purchase of an engine manufacturer to allow FFE to better 5 integrate its supply chain and get more control over engine features. After investigating several possible companies, 6 Anna feels that the purchase of Mantz Engines Inc (MEI), is a possibility. She has asked Aiden Carney to analyze Mantz's 7 value. 9 Mantz Engines, Inc., is a privately owned company that was founded seven years ago by Sydney and Claire Mantz. The o company manufacturers farm engines used primarily in farm equipment. Mantz has experienced rapid growth because -1 of a proprietary technology that increases the fuel efficiency of its engines with very little sacrifice in performance. The -2 company is equally owned by Sydney and Claire Mantz. The original agreement between the siblings gave each 200,000 3 shares of stock. The Mantz's have not issued any additional stock nor have they sold any of their stock since founding -4 the company. 6 Anna has asked Aiden to determine a value per share of Mantz stock. Aiden has gathered the following information 7 about engine manufacturing firms that are publicly traded. DPS o $ Jensen Motors Corp. Blue Cow Farm Engines Inc. Horrocks Farm Equipment EPS 3.50 8.00 (0.50) 2.00 4.00 1.00 STOCK PRICE $ 37.00 90.00 30.00 ROE 12.00% 15.00% 16.00% ROA 9.00% 11.00% 13.00% 2 5 Horrocks Farm Equipment's negative earnings per share (EPS) was the result of an accounting write-off last year. 6 Without the write-off, EPS for the company would have been $2.25. Last year, Mantz Engines Inc (MEI) had an EPS of 7 $4.00 and paid a dividend to Sydney and Claire Mantz of $300,000 each. The company also had a return on equity of 8 16%. Anna tells Aiden that a 14% required rate of return should be used to evaluate the value of Mantz. -9 -0 DPS = Dividends per share 1 1. Assuming the company continues its current growth rate, what is the value per share of the company's 2 stock? (Do not round intermediate calculations) 4 a. What is the company's total earnings? 9 b. What are the company's payout and retention ratios? Payout Ratio = Retention Ratio = no 77 72 13 15 c. Using the retention ratio, calculate the company's growth rate. 76 7> 19 20 d. Now you can value the company using the entire dividend payment. The total value of the 21 company's equity under these assumptions is: 22 27 28 e. What is the value per share based on your response to part d? 20 A B C D E F 1 Background information 2 Anna has been talking with the company's directors about the future of Frentheway Farm Equipment (FFE). The 3 company has been using outside suppliers for various key components of the company's farm equipment, including 4 engines. Anna has decided that FFE should consider the purchase of an engine manufacturer to allow FFE to better 5 integrate its supply chain and get more control over engine features. After investigating several possible companies, 6 Anna feels that the purchase of Mantz Engines Inc (MEI), is a possibility. She has asked Aiden Carney to analyze Mantz's 7 value. 9 Mantz Engines, Inc., is a privately owned company that was founded seven years ago by Sydney and Claire Mantz. The o company manufacturers farm engines used primarily in farm equipment. Mantz has experienced rapid growth because -1 of a proprietary technology that increases the fuel efficiency of its engines with very little sacrifice in performance. The -2 company is equally owned by Sydney and Claire Mantz. The original agreement between the siblings gave each 200,000 3 shares of stock. The Mantz's have not issued any additional stock nor have they sold any of their stock since founding -4 the company. 6 Anna has asked Aiden to determine a value per share of Mantz stock. Aiden has gathered the following information 7 about engine manufacturing firms that are publicly traded. DPS o $ Jensen Motors Corp. Blue Cow Farm Engines Inc. Horrocks Farm Equipment EPS 3.50 8.00 (0.50) 2.00 4.00 1.00 STOCK PRICE $ 37.00 90.00 30.00 ROE 12.00% 15.00% 16.00% ROA 9.00% 11.00% 13.00% 2 5 Horrocks Farm Equipment's negative earnings per share (EPS) was the result of an accounting write-off last year. 6 Without the write-off, EPS for the company would have been $2.25. Last year, Mantz Engines Inc (MEI) had an EPS of 7 $4.00 and paid a dividend to Sydney and Claire Mantz of $300,000 each. The company also had a return on equity of 8 16%. Anna tells Aiden that a 14% required rate of return should be used to evaluate the value of Mantz. -9 -0 DPS = Dividends per share 1 1. Assuming the company continues its current growth rate, what is the value per share of the company's 2 stock? (Do not round intermediate calculations) 4 a. What is the company's total earnings? 9 b. What are the company's payout and retention ratios? Payout Ratio = Retention Ratio = no 77 72 13 15 c. Using the retention ratio, calculate the company's growth rate. 76 7> 19 20 d. Now you can value the company using the entire dividend payment. The total value of the 21 company's equity under these assumptions is: 22 27 28 e. What is the value per share based on your response to part d? 20