Stock Valuation at Ragan, Inc. Ragan, Inc., was founded nine years ago by brother and sister they have gathered the information about their main competibecause of a proprietary technology that increases the energy the write-off, earnings per share for the company would have efficiency of its units. The company is equally owned by Car- been $1.06. The ROE for Expert HVAC is based on net income rington and Genevieve. The original partnership agreement excluding the write-off. between the siblings gave each 50,000 shares of stock. In the Last year, Ragan, Inc., had an EPS of $4.54 and paid a event either wished to sell stock, the shares first had to be dividend to Carrington and Genevieve of $60,000 each. The offered to the other at a discounted price. company also had a return on equity of 18 percent. The siblings Although neither sibling wants to sell, they have decided believe that 15 percent is an appropriate required return for the they should value their holdings in the company. To get started, company. Answer the Question 1 in page 277. Q. Assuming the company continues its current growth rate, what is the value per share of the company's stock? Hint: [STEP 1] What was the company's total earnings last year? Hint: [STEP 2] The company has a total of two shareholders (siblings). What was the company's total dividend payment last year? What is the percentage of dividends as a percentage of net income? Hint: [STEP 3] What was the company's retained earnings rate (=b=1 - dividend payoutet income) last year? Hint: [STEP 4] Use the equation "Growth rate of the company =g=ROEb " Hint: [STEP 5] Apply dividend growth model with g and an appropriate required return R. Stock Valuation at Ragan, Inc. Ragan, Inc., was founded nine years ago by brother and sister they have gathered the information about their main competibecause of a proprietary technology that increases the energy the write-off, earnings per share for the company would have efficiency of its units. The company is equally owned by Car- been $1.06. The ROE for Expert HVAC is based on net income rington and Genevieve. The original partnership agreement excluding the write-off. between the siblings gave each 50,000 shares of stock. In the Last year, Ragan, Inc., had an EPS of $4.54 and paid a event either wished to sell stock, the shares first had to be dividend to Carrington and Genevieve of $60,000 each. The offered to the other at a discounted price. company also had a return on equity of 18 percent. The siblings Although neither sibling wants to sell, they have decided believe that 15 percent is an appropriate required return for the they should value their holdings in the company. To get started, company. Answer the Question 1 in page 277. Q. Assuming the company continues its current growth rate, what is the value per share of the company's stock? Hint: [STEP 1] What was the company's total earnings last year? Hint: [STEP 2] The company has a total of two shareholders (siblings). What was the company's total dividend payment last year? What is the percentage of dividends as a percentage of net income? Hint: [STEP 3] What was the company's retained earnings rate (=b=1 - dividend payoutet income) last year? Hint: [STEP 4] Use the equation "Growth rate of the company =g=ROEb " Hint: [STEP 5] Apply dividend growth model with g and an appropriate required return R