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Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just? completed, Grips earned ?$2.73 per share and paid cash dividends of ?$1.03 per share (D0=$1.03?). Grips' earnings and dividends are expected to grow at 30?% 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 16?% on investments with risk characteristics similar to those of? Grips?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92379798

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