Reeby Sports -

11/29/21, 12:17 PM Ten Years Ago, In 2010, George Reeby Founded A Sma... | Chegg.com

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George observes boon value per share as $13.17 which relates to year 2019. As such we assume data for 2020 are estimates.

Based on 3 years data from 2015 to year 2019:

The average ROE, average dividend payout ratio (dividend per share/EPS) and retention ratio ( 1 - dividend payout ratio) are calculated for 5 years as below:

The average ROE % is 15.6% ,

average dividend payout ratio is 29.5% and

average retention ratio is 70.5%

Growth = ROE * Retention ratio = 15.6% * 70.5% = 11% (rounded off)

When opportunities for investment disappears after six or eight years:

ROE will be equal to Cost of capital = 10% and

Growth will be = 10% * 70.5% = 7% (rounded off)

Assumption : The opportunity for further profitable investment disappears after six years:

Current Share Value = Present value of dividends from year 2020 to 2025 + Present value of dividends from year 2026 onwards

Present value of dividends from year 2020 to 2025 is calculated as below:

DIVIDEND IN 2027=DIVIDEND IN 2026*1.07=1.20

PV of dividends from year 2026 onwards = [$1.20 /(10% - 7%)] / (1 + 10%)6

=$22.58

Current Share value = $22.58 + $3.72 =$26.30

Assumption : The opportunity for further profitable investment disappears after eight years:

11/29/21, 12:17 PM Ten Years Ago, In 2010, George Reeby Founded A Sma... | Chegg.com

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Present value of dividends from year 2021 to 2028 is calculated as below:

Dividend in year 2029 = Dividend in year 2028 * 1.07

= $1.48

PV of of dividends from year 2029 onwards = [$1.48 /(10% - 7%)] / (1 + 10%)8

=$23.01

Current share value per share = $23.01 + $5.00 = $28.01

Current Share value = $22.58 + $3.72 =$26.30