Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.66 per share and paid cash dividends of $1.96 per share (D Subscript 0=$1.96). Grips' earnings and dividends are expected to grow at 25% per year for the next 3 years, after which they are expected to grow 6% per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 14% 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