Stock Valuation at Ragan, Inc.
Ragan, Inc., 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 following information about their main competitors:
Expert HVAC Corporation’s negative earnings 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 $.54. Last year, Ragan, Inc., had an EPS of $4.85 and paid a dividend to Carrington and Genevieve of $75,000 each. The company also had a return on equity of 17 percent. The siblings believe that 14 percent is an appropriate required return for the company
1. Assuming the company continues its current growth rate, what is the value per share of the company’s stock?
2. To verify their calculations, Carrington and Genevieve have hired Josh Schlessman as a consultant. Josh was previously an equity analyst and covered the HVAC industry. Josh has examined the company’s financial statements, as well as those of its competitors. Although Ragan, Inc., currently has a technological advantage, his research indicates that other companies are investigating methods to improve efficiency. Given this, Josh believes that the company’s technological advantage will last only for the next five years. After that period, the company’s growth will likely slow to the industry growth average. Additionally, Josh believes that the required return used by the company is too high. He believes the industry average required return is more appropriate. Under this growth rate assumption, what is your estimate of the stock price?
keeps track of removals from inventory continuously, thus monitoring current levels of each item Select one: O a. Continuous review system b. Periodic review system O c. ...Apr 30 2021
The capital cost allowance form of depreciation is used for income tax purposes.92) GAAP require that companies use the same depreciation method for financial reporting p...Dec 24 2019
If 218g of H2S reacts, how many grams of sulfur will be produced in 2H2S +SO2 arrow3S+2H2OMay 13 2021
Ethical Issue: Assume that you have drafted a letter to a customer in which you apologize for the way the customer’s account was fouled up by the Accounting Department. Y...Aug 07 2020
A bandlimited white-noise process has a doublesided power spectral density of 2 x10- 5 W/Hz in the frequency range j j ≤ 1 kHz. Find the autocorrelation function of the ...Jul 31 2020
The text discusses strategies to be used with the student with autism during the elementary school years. Using the strategies listed, discuss how you would begin to prog...Dec 14 2019
The following table shows samples of response times for an emergency ambulance service. The data cover a historically representative seven days. Four response calls were ...Aug 27 2020
Circle the letter of the right definition of a rock. A rock is a) a solid conglomerate ofminerals; b) an aggregate of solid minerals; c) a solid and natural mixture of mi...Jul 02 2020
The long-run Phillips curve is:A. the same as the short-run Phillips curve.B. negatively sloped, showing an inverse relationship between unemployment and inflation.C. unr...May 08 2021
Suppose that a consumer had a utility function given by: U=X4Y2. This consumer has a budget of $30. Fill in the value of this consumer's demand function. X = ____*(1/Px).Apr 30 2020