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Nautilus Marine Engine's negative earnings per share (EPS) were the result of an accounting write-off last year. Without the write-off, EPS for the company would have been $2.07. Last year, Ragan had an EPS of $5.35 and paid a dividend to Carrington and Genevieve of $320,000 each. The company also had a return on equity of 21%. Larissa tells Dan that a required return for Ragan of 18% is appropriate. 1.) Assuming the company continues its current growth rate, what is the value per share of the company's stock? 2.) Dan has examined the company's financial statements, as well as examining those of its competitors. Although Ragan currently has a technological advantage, Dan's research indicates that Ragan's competitors are investigating other methods to improve efficiency. Given this, Dan believes that Ragan's technological advantage will last for the next five years. After that period, the company's growth will likely slow to the industry average. Additionally, Dan believes that the required return the company uses is too high. He believes the industry average required return is more appropriate. Under Dan's assumption, what is the estimated stock price? 3.) What is the industry average price-earnings ratio? What is Ragan's price-earnings ratio? Comment on any differences and explain why they may exist. 4.) Assume the company's growth rate declines to the industry average after five years. What percentage of the stock's value is attributable to growth opportunities? 5.) Assume the company growth rate slows to the industry average in five years. What future return on equity does this imply? 6.) Carrington and Genevieve are not sure if they should sell the company. If they do not sell the company outright to East Coast yachts, they would like to try and increase the value of the company's stock. They want to retain the company and do not want to sell stock to outside investors. They also feel that the company's debt is at a manageable level and do not want to borrow more money. What steps can they take to try and increase the price of the stock? Are there any conditions under which this strategy would not increase the stock price? Blue Ribband Motors Corp- EPS=$1.09 DPS=$.19 Stock Price=$16.32 ROE=10.00% R=12.00% Bon Voyage Marine Inc.- EPS=1.26 DPS=.55 Stock Price=13.94 ROE=12.00% R=17.00% Nautilus Marine Engines- EPS=(.27) DPS=.57 Stock Price=23.97 ROE=N/A R=16.00% Industry Average- EPS=$.73 DPS=$.44 Stock Price=$18.08 ROE=11.00% R=15.00%
Discuss and explain the difference between arithmetic average versus geometric average and which one is more effective or provides a more complete picture when valuing a stock's past performance over the last 5 years?
East Midland Furniture' (EMF) manufacturer is aiming to expand their business in the UK by establishing a new production plant in London.
Computation of yield from investment thus it is therefore well known that profits may be slim nowadays
In the recent discussion memorandum, Distinguishing between Liability and Equity Instruments and Accounting for Instruments with the Characteristics of Both, the FASB addressed issue of whether redeemable preferred stock is debt or equity.
Depreciation will be calculated using the 3-year MACRS rates of 33%, 45%, 15%, and 7% for the first through the fourth year, respectively. Looner Industries%u2019 marginal tax rate is 40%, and its cost of capital is 10%. Should the plant be built?
what is the minimum expected annual return for Stock 3 that will enable Sara to achieve her investment requirement?
Three Staffing Company purchased net assets of Time Management Inc. for $390,000. Time Management Corporation is a retailer of software, books, seminars and related items.
Suppose that in 2010, a $10 silver certificate from 1898 sold for $11,200. For this to have been true, what would the annual increase in value on the certificate have been?
You just took a 12000.00 loan and has 4 year term and repayments of 4equal year end payments the interest rate of the loan is 11.5% consider the final loan how much interest do you pay in the final payment
Discuss and explain the difficulties involved in having a standardized price for a company's products across all countries.
What are the percentage changes in the values of the two portfolios for a 5% per annum increase in yields?
Define the three conditions that make up a perfect capital market, and then compare and contrast the effects of perfect capital markets and imperfect capital markets on value. Can they create or destroy value? Explain.
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