Common stock

valueVariable

growthNewman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned

$3.06

per share and paid cash dividends of

$1.36

per share

(D0=$1.36).

Grips' earnings and dividends are expected to grow at

35%

per year for the next 3 years, after which they are expected to grow

5%

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?

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 $3.06 per share and paid cash dividends of $1.36 per share (D0=$1.36). Grips' eamings and dividends are expected to grow at 35% per year for the next 3 years, after which they are expected to grow 5% 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? The maximum price per share that Newman should pay for Grips is $ (Round to the nearest cent)