Stock value-considering cash purchase of stock of grips tool

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Reference no: EM131461900

Common stock value l—Variable growth Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned$2.99 per share and paid cash dividends of $1.29 per share (D0equals=$ 1.29 ) Grips' earnings and dividends are expected to grow at 30 % per year for the next 3 years, after which they are expected to grow 6% 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?

Reference no: EM131461900

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