Case 1 Regan Engineering
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Submitted by dthakkar1788 on June 5, 2011
- Category: Business
- Words: 247
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Case 1 Regan Engineering
Case#1
Stock Valuation at Ragan Engines
Ans. 1
EPS= $5.08
No. of shares= 300,000
r=20%
ROE=25%
DPS=Total dividend/No. of shares=640000/300000=$2.13
Net income = EPS*No. of shares
=5.08*300000
=1524000
g=Retention ratio*ROE
=[1-(640000/1524000)*0.25
= (1-0.42)*0.25
=0.58*0.25=0.145=14.5%
Po=D1/r-g
=Do (1+g)/r-g
=2.13(1+0.145)/0.20-0.145
=2.43885/0.055
= $44.34
Ans. 2
Industry growth rate g = Retention ratio*ROE
=...
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