Stock Valuation at Ragan, Inc. Ragan, Ine., was founded nine years ago by brother and sister Carrington and Genevieve Ragan. The company manufactures and installs commercial heating, ventilation, and cooling (HVAC) units, Ragan, Inc., has experienced rapid growth because of a proprietary technology that increases the energy efficiency of its units. The company is equally owned by Carrington and Genevieve. The original partnership agreement between the siblings gave each 50,000 shares of stock. In the event either wished to sell stock, the shares first had to be offered to the other at a discounted price. Although neither sibling wants to sell, they have decided they should value their holdings in the company. To get started, they have gathered the information about their main competitors in the table below. Expert HVAC Corporation's negative carnings per share were the result of an accounting write-off last year. Without the write-off, earnings per share for the company would have been $1.06. The ROE for Expert HVAC is based on net income excluding the write- off. Last year, Ragan, Inc., had an EPS of $4.54 and paid a dividend to Carrington and Genevieve of 560,000 cach. The company also had a return on equity of 18 percent. The siblings believe that 15 percent is an appropriate required return for the company. 4. Carrington and Genevieve are unsure how to interpret the price-earnings ratio. After some head scratching, they've come up with the following expression for the price-earnings ratio: E1P0=R(ROEb)1b Beginning with the constant dividend growth model, verify this result. What does this expression imply about the relationship between the dividend payout ratio, the required return on the stock, and the company's ROE