Question
Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.43 per share and paid
Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.43 per share and paid cash dividends of $1.73 per share (D0=$1.730. Grips earnings and dividends are expected to grow at 20% per year for the next 3 years, after which they are expected dto grow 6% per year to infinity. What is teh maximum price per share that Newman should pay for Grips if it has a required return of 12% on investments with risk characteristics similar to those of Grips
A.) the maximum price per share that Newman should pay for Grips is $?
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