Common stock

valueVariable

growthNewman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned

$3.54

per share and paid cash dividends of

$1.84

per share

(D0=$1.84).

Grips' earnings and dividends are expected to grow at

25%

per year for the next 3 years, after which they are expected to grow

7%

per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of

15%

on investments with risk characteristics similar to those of Grips?

Question content area bottom

Part 1

The maximum price per share that Newman should pay for Grips is

$enter your response here.

(Round to the nearest cent.)