Stock Valuation at Ragan, Inc. Ragan, Inc., was founded nine years ago by brother Rand sister Carrington and Genevieve Ragan. The company manufactures and installs commerclat heating. ventilation, and cooling (HVAC) units, Ragan, Inc., has experienced ropid growth because of a proprietary technology that incteases the energy efficiency of its units. The company is equally owned by Carrington and Genevieve. The original partnership agreement between the sibtings gave each 50,000 shares of stock. In the event elther wished to sell stock, the shares first hod to be offered to the other at o dis. counted price. Although neither sibling wants to sell, they have desided they should value their holdings in the company. To get started, they hove gathered the following infor. mation obout their main competitors: Expert HVAC Corporation's negative earnings per thare were the result of an accounting write-off last year: Without the waite off enrings per sthore for the com pany would have been stua. Last yeac, Ragan, inc, had an EPS of $3,15 and paid , dividend to Corrington and Genevieve of $45,000 sach the company wiso hid o return on equity of 17 percent. The siblings belleve that 14 percent is an oppropilate required return for the company. QUESTIONS 1. Assuming the company continues its current growth rote, what is the value per share of the compony's stock? 2. To verify their calculetions, Cortington and Genevieve hove hired Josh Schlessman as o consultont Josh was previously an equity analyst and covered the HVAC industry. Josh has examined the compony/s financtat stotements, as wolf as thiose of its competitors. Although Rogan, Ine, cur. rently has a technological advantage, his re. search indicates that other componies are investigoting methods to improve efficiency. Given this, Josh believes that the company's tectirotogicat advantage will last only for the next five years, After that period, the company's growth will likely slow to the industry growth av. erage. Additionally, Josh believes that the required feturn used by the company is too high. He believes the industry average required return is more appropelate. Under this growth rate assumption, what is your estimate of the stock pires