60.1K

Verified Solution

Link Copied!

Please show all work!! Thank you!

Larissa has been talking with the company's directors about the future of East Coast Yachts. To this point, the company has used outside suppliers for various key components of the company's yachts, including engines. Larissa has decided that East Coast Yachts should consider the purchase of an engine manufacturer to allow East Coast Yachts to better integrate its supply chain and get more control over engine features. After investigating several possible companies, Larissa feels that the purchase of Ragan Engines, Inc., is a possibility. She has asked Dan Ervin to analyze Ragan's value. Ragan Engines, Inc., was founded nine years ago by brother and sister-Carrington and Genevieve Ragan-and has remained a privately owned company. The company manufactures marine engines for a variety of applications. Ragan has experienced rapid growth because of a proprietory technology that increases the fuel efficiency of its engines with very little sacrifice in performance. The company is equally owned by Carrington and Genevieve. The original partnership agreement between the siblings gave each 135,000 shares of stock Larissa has asked Dan to determine a value per share of Ragan stock. To accomplish this, Dan has gathered the following information about some of Ragan's competitors that are publicly traded: EPS DPS Stock Price |$ $ 1.13 |$ 0.35 |$ 1.41 |$ 0.43 |$ 18.25 | 15.31| 11.00% | 14.00% | Blue Ribband Motors Corp Bon Voyage Marine, Inc Nautilus Marine Engines Industry Average 14.00% 17.00% 13.00% 14.67% (0.23) 0.61S 28.72 N/A $ 0.77 |$ 0.46 |$ 20.76 | 12.50% | Nautilus Marine Engines' negative earnings per share (EPS) was the result of an accounting write- off last year. Without the write-off, EPS for the company would have been $1.75 Last year, Ragan, had an EPS of $4.10 and paid a dividend to Carrington and Genevieve of $275,000 each. The company also had a return on equity of 18 percent. Larissa tells Dan that a required return for Ragan of 13 percent is appropriate. I. Assuming the company continues its current growth rate, what is the value per share of the company's stock? 2. Dan has examined the company's financial statements, as well as examining those of its competitors. Although Ragan currenty has a technological advantage, Dan's research indicates that Ragan's competitors are investigating other methods to improve efficiency. Given this, Dan Larissa has been talking with the company's directors about the future of East Coast Yachts. To this point, the company has used outside suppliers for various key components of the company's yachts, including engines. Larissa has decided that East Coast Yachts should consider the purchase of an engine manufacturer to allow East Coast Yachts to better integrate its supply chain and get more control over engine features. After investigating several possible companies, Larissa feels that the purchase of Ragan Engines, Inc., is a possibility. She has asked Dan Ervin to analyze Ragan's value. Ragan Engines, Inc., was founded nine years ago by brother and sister-Carrington and Genevieve Ragan-and has remained a privately owned company. The company manufactures marine engines for a variety of applications. Ragan has experienced rapid growth because of a proprietory technology that increases the fuel efficiency of its engines with very little sacrifice in performance. The company is equally owned by Carrington and Genevieve. The original partnership agreement between the siblings gave each 135,000 shares of stock Larissa has asked Dan to determine a value per share of Ragan stock. To accomplish this, Dan has gathered the following information about some of Ragan's competitors that are publicly traded: EPS DPS Stock Price |$ $ 1.13 |$ 0.35 |$ 1.41 |$ 0.43 |$ 18.25 | 15.31| 11.00% | 14.00% | Blue Ribband Motors Corp Bon Voyage Marine, Inc Nautilus Marine Engines Industry Average 14.00% 17.00% 13.00% 14.67% (0.23) 0.61S 28.72 N/A $ 0.77 |$ 0.46 |$ 20.76 | 12.50% | Nautilus Marine Engines' negative earnings per share (EPS) was the result of an accounting write- off last year. Without the write-off, EPS for the company would have been $1.75 Last year, Ragan, had an EPS of $4.10 and paid a dividend to Carrington and Genevieve of $275,000 each. The company also had a return on equity of 18 percent. Larissa tells Dan that a required return for Ragan of 13 percent is appropriate. I. 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 currenty has a technological advantage, Dan's research indicates that Ragan's competitors are investigating other methods to improve efficiency. Given this, Dan

Answer & Explanation Solved by verified expert

See Answer