Common stock value and variable growth

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Reference no: EM131597479

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 $3.92 per share and paid cash dividends of $2.22 per share (D0=$2.22?).

?Grips' earnings and dividends are expected to grow at 30?% 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 12?% 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.)

Is there a formula we can use in Excel?

Reference no: EM131597479

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