Question
Common stock value Variable growth Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned
Common stock value Variable growth
Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.61 per share and paid cash dividends of $1.91 per share (D0equals $ 1.91). Grips' earnings and dividends are expected to grow at 25 % per year for the next 3 years, after which they are expected to grow 9 % per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 13 % on investments with risk characteristics similar to those of Grips? The maximum price per share that Newman should pay for Grips is
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