After discussions with Josh, Carrington and Genevieve agree that they would like to try to increase the value of the company stock. Like many small business owners, they want to retain control of 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 increase the price of the stock? Are there any conditions under which this strategy would not increase the stock price? Ragan Thermal Systems, Inc., was founded nine years ago by brother and sister Carrington andGenevieve Ragan. The company manufactures and installs commercial heating, ventilation, andcooling (HVAC) units. Ragan has experienced rapid growth because of a proprietary technologythat increases the energy efficiency of its systems. The company is equally owned by Carringtonand Genevieve. The original agreement between the siblings gave each 50,000 shares of stock.In the event either wished to sell the stock, the shares first had to be offered to the other at adiscounted price.Although neither sibling wants to sell any shares at this time, they have decided they shouldvalue their holdings in the company for financial planning purposes. To accomplish this, theyhave gathered the following information about their main competitors.Ragan Thermal Systems, Inc., CompetitorsEPSDPSStock PriceROE$ .821.32$ .16$15.1912.4910%Arctic Cooling, Inc.National Heating & CoolingExpert HVAC Corp.Industry average11%.521413-47.5448.601412$0.56$0.41$25.4313%11.67%Expert HVAC Corp.'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 $2.34.Last vear, Ragan had an EPS of $4.32 and paid a dividend to Carrington and Genevieveof $54.000 each. The company also had a return on equity of 25 percent. The siblings believe arequired return for the company of 20 percent is appropriate,

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After discussions with Josh, Carrington and Genevieve agree that they would like to try to increase the value of the company stock. Like many small business owners, they want to retain control of 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 increase the price of the stock? Are there any conditions under which this strategy would not increase the stock price?

After discussions with Josh, Carrington and Genevieve agree that they would like to try to increase the value of the company stock. Like many small business owners, they want to retain control of 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 increase the price of the stock? Are there any conditions under which this strategy would not increase the stock price?

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter7: Corporations: Reorganizations

Section: Chapter Questions

Problem 31P

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Ragan Thermal Systems, Inc., was founded nine years ago by brother and sister Carrington and Genevieve Ragan. The company manufactures and installs commercial heating, ventilation, and cooling (HVAC) units. Ragan has experienced rapid growth because of a proprietary technology that increases the energy efficiency of its systems. The company is equally owned by Carrington and Genevieve. The original agreement between the siblings gave each 50,000 shares of stock. In the event either wished to sell the stock, the shares first had to be offered to the other at a discounted price. Although neither sibling wants to sell any shares at this time, they have decided they should value their holdings in the company for financial planning purposes. To accomplish this, they have gathered the following information about their main competitors. Ragan Thermal Systems, Inc., Competitors EPS DPS Stock Price ROE Arctic Cooling, Inc. National Heating & Cooling Expert HVAC Corp. Industry average $.82 $.16…
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