Shares owned by each sibling Ragan EPS Dividend to each sibling Ragan ROE Ragan required return 50,000 $3.75 $48,000.00 17% 14% Artic Cooling, Inc. National Heating & Cooling Expert HVAC Corp. Industry average EPS $1.30 1.95 -0.37 S0.96 DPS $0.15 0.22 0.12 $0.16 Stock price $25.34 29.85 22.13 $25.77 ROE 9.00% 11.00% 10.00% 10.00% 10.00% 13.00% 12.00% 11.67% Expert EPS w/o write-off $1.10 Output area: HINTS 1) Total earnings Retention ratio Growth rate Current dividend per share Dividend per share next year EPS'Number of shares Outstanding 1-Dividend Payout Ratio ROE"b; b is retention ratio D(1) = D(OX(149) Value per share Use constant growth rate model For Expert EPS, use one wlo write-off 2) Industry EPS Industry payout ratio Industry retention ratio Industry growth rate ROE*b; b is retention ratio: Use industry averages Estimate dividends from Year 1 to Year 5 Year 1 2 3 4 5 6 Stock value in Year 5 Estimate stock price in year 5 using industry growth rate and industry required return Stock price today Calculate price by calculating PV of Dividends from Year 1 to Year 5 and Price at Year 5 Industry Average Stock Price Industry Average EPS 3) Industry PE Ragan PE (original assumption) Calculated Price/ EPS Ragan PE (revised assumption) Calculated Price/ EPS Stock price Imolled by Industry PE Industry PEEPS 51 I ROF Use EROF'h Shares owned by each sibling Ragan EPS Dividend to each sibling Ragan ROE Ragan required return 50,000 $3.75 $48,000.00 17% 14% Artic Cooling, Inc. National Heating & Cooling Expert HVAC Corp. Industry average EPS $1.30 1.95 -0.37 S0.96 DPS $0.15 0.22 0.12 $0.16 Stock price $25.34 29.85 22.13 $25.77 ROE 9.00% 11.00% 10.00% 10.00% 10.00% 13.00% 12.00% 11.67% Expert EPS w/o write-off $1.10 Output area: HINTS 1) Total earnings Retention ratio Growth rate Current dividend per share Dividend per share next year EPS'Number of shares Outstanding 1-Dividend Payout Ratio ROE"b; b is retention ratio D(1) = D(OX(149) Value per share Use constant growth rate model For Expert EPS, use one wlo write-off 2) Industry EPS Industry payout ratio Industry retention ratio Industry growth rate ROE*b; b is retention ratio: Use industry averages Estimate dividends from Year 1 to Year 5 Year 1 2 3 4 5 6 Stock value in Year 5 Estimate stock price in year 5 using industry growth rate and industry required return Stock price today Calculate price by calculating PV of Dividends from Year 1 to Year 5 and Price at Year 5 Industry Average Stock Price Industry Average EPS 3) Industry PE Ragan PE (original assumption) Calculated Price/ EPS Ragan PE (revised assumption) Calculated Price/ EPS Stock price Imolled by Industry PE Industry PEEPS 51 I ROF Use EROF'h
