Reference no: EM132673583

Hampton Electricals Ltd was founded ten years ago by Ricky and Emma

• The company manufactures and installs both traditional and contemporary models of lights for residential and commercial purposes. Hampton Ltd has experienced rapid growth because of the new technology that increases the energy efficiency of its systems and the introduction of new models of led integrated lights. The company is owned equally by Ricky and Emma and holding 100,000 shares each. If either wishes to sell the shares, the shares have to be offered first to the other shareholder at a discounted price. In september 2020, Ricky and Emma have decided to value their holdings in the company for financial planning purposes.

To accomplish this, they have gathered the following information about their main competitors.
 
                          EPS (Cents)            DPS (Cents)          Share Price ($)       ROE (%)        Required rate (%)

company A               0.42                    0.08                     7.65                          10.5                      9.5
Company B            0.66                    0.26                   6.25                             11.5                       10.5
Company C               -0.24              0.27                     24.3                              12.5                  11.5
Company D                0.28             0.21                      12.73                                11.5             10.5

Last year, Hampton Electricals Ltd had an EPS of $2.625 and paid a dividend to Ricky and Emma of $105,000 each. The company also had a return on equity of 15%. Ricky and Emma believe a required rate of return of 13% for the company is appropriate.

Required:

Problem 1: Assuming the company continues its current growth rate into the infinite period, what is the share price of the company?