Input area:
Shares owned by each sibling 150,000
Ragan EPS 5.35$
Dividend to each sibling 320,000$
Ragan ROE 21%
Ragan required return 18%
EPS DPS Stock price ROE R
Output area:
1) Total earnings 1,605,000.00$
Payout ratio 39.88%
2) Industry EPS 1.51$
Industry payout ratio 28.98%
Industry retention ratio 71.02%
Industry growth rate 7.81%
3) Industry PE 12.00
Ragan PE (original assumption) 8.36
Chapter 9
Stock Valuation at Ragan Engines
Cash cow value 10,700,000.00$