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Unformatted text preview: Bryan W. Redd Corporate Finance H MWRK I #5 Summer 2010 1. g= b x ROE (d) Dividend payout ratio = 1.26/4.54(EPS )= .27753304 (b) Retention rate= 1-.27753304=. 7224669604 (g) Growth rate = .7224669604 x .25(ROE) = .1806167401 (g) Growth rate = 18.06% D = 126,000/100,000 = $1.26 D 1 = 1.26(1.1806)= $1.49 Value/Share= 1.49/(.20 - .1806) = $76.68 3. P/E = P /EPS 1 Industry P/E = 13.09/. 56 = 23.38 Ragan EPS = 4.54 EPS 1 = 4.54(1.1806) = 5.36 Ragan, Inc. P/E = 76.68/5.36 = 14.31 Yes, because of the fact that Expert HVAC Corp, which had an EPS of -.48, had an accounting write-off. This accounting write off is not a factor in calculating Expert HVACs EPS on a regular basis. Therefore, because the affect of this account write-off was substantial (without the write off EPS= $1.06) telling us that this is an extraordinary circumstance which has adversely affected our EPS calculation, thus it should be viewed as an extreme, or outlying value. Excluding Expert HVACs EPS, our new EPS becomes $1.08, a significant outlying value....
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This note was uploaded on 07/26/2011 for the course FIN 4233 taught by Professor Craig during the Spring '11 term at Arkansas.
- Spring '11
- Corporate Finance