IntegrativeRisk and Valuation???

Hamlin Steel Company wishes to determine the value of Craft? Foundry, a firm that it is considering acquiring for cash. Hamlin wishes to determine the applicable discount rate to use as an input to the? constant-growth valuation model. ? Craft's stock is not publicly traded. After studying the required returns of firms similar to Craft that are publicly? traded, Hamlin believes that an appropriate risk premium on Craft stock is about 5?%. The? risk-free rate is currently 7?%. Craft's dividend per share for each of the past 6 years is shown in the following? table:

2015: $3.13

2014: $3.00

2013: $2.89

2012: $2.78

2011: $2.67

2010: $2.57

.a. Given that Craft is expected to pay a dividend of ?$3.25 next? year, determine the maximum cash price that Hamlin should pay for each share of Craft. ?(Hint: Round the growth rate to the nearest whole? percent.)

b. Describe the effect on the resulting value of Craft? from:

?(1) A decrease in its dividend growth rate of? 2% from that exhibited over the? 2010-2015 period.

?(2) A decrease in its risk premium to 4?%.