Common stock value-Variable growth Newman Manufacturing is considering a cash purchase of the stock of Grips...
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Common stock value-Variable growth Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.75 per share and paid cash dividends of $2.05 per share (Do $2.05). 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? Common stock value-Variable growth Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.75 per share and paid cash dividends of $2.05 per share (Do $2.05). 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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