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Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just? completed, Grips earned ?$2.86 per share and paid cash dividends of ?$1.16 per share ?(D0=$1.16?). ? Grips' earnings and dividends are expected to grow at 40?% 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 13?% on investments with risk characteristics similar to those of? Grips?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92406334

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