Question: Common stock value - Variable growth Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips

Common stock value - Variable growth Newman Manufacturing is considering a

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 $3.81 per share and paid cas dividends of $2.11 per share (D0=$2.11). Grips' earnings and dividends are expected to grow at 20% per year for the next 3 years, after which they are expected to grow 9% per year to infinity. What is th 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? The maximum price per share that Newman should pay for Grips is 9 (Round to the nearest cent.)

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