Considering cash purchase of stock of grips tool

Assignment Help Financial Management
Reference no: EM131535454

Newman manufactuing is considering a cash purchase of stock of Grips Tool. During the year just completed, Grips earned $3.07 per share and paid cash dividends of $1.37 per share (D0=$1.37). Grips earning 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 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: EM131535454

Questions Cloud

What is profitability index of the project : Company XYZ has spent $250,000 to develop a new product – smart beehive. What is the profitability index of the project?
What will be the effective purchasing power : When the firm repays the original $6,500,000 loan this year, what will be the effective purchasing power of the $6,500,000?
What should be initial price of the bond : A 17-year, $1,000 par value zero-coupon rate bond is to be issued to yield 7 percent. What should be the initial price of the bond? Bond Price:
Evaluating the potential purchase of small business : You are evaluating the potential purchase of a small business currently generating $44,000 if after-tax cash flow (D0= $44000).
Considering cash purchase of stock of grips tool : Newman manufactuing is considering a cash purchase of stock of Grips Tool.
Mathematical interest theory : Find the purchase price. Divide rhe 4th coupon into interest and premium adjustment.
The firm required net working capital : The machine will also immediately lower the firm’s required net working capital by $95,000.
Book value versus market value : What are the company’s capital structure weights on a market value basis? Which are more relevant, the book or market value weights? Why??
You expect to have at the end of the investment horizon : How much do you expect to have at the end of the investment horizon if you invest in the ETF?

Reviews

Write a Review

Financial Management Questions & Answers

  How much equity does superior widgets have on balance sheet

Superior widgets manufacturing reported a debt-to-equity ratio of 1.9 times at the end of 2015. how much equity does superior widgets have on a balance sheet?

  How much should he set aside today for purchase

Fred plans to purchase a car four years from now. The car will cost $57,325 at that time. Assume that fred can earn 8.56 percent compounded monthly on his money. How much should he set aside today for the purchase?

  Relation between money growth and inflation

The relation between money growth and inflation is less perfect among countries with inflation below 10 percent than it is among countries with higher inflation. - What might explain this difference?

  Return on assets and return on common shareholders equity

When considering the difference between return on assets (ROA) and return on common shareholders' equity (ROE), Preferred dividends are deducted from the numerator when calculating ROE, but not when calculating ROA.

  What then is the cross rate between francs and pounds

Suppose the exchange rate between U.S. dollars and the Swiss franc is SFr1.4 = $1, and the exchange rate between the dollar and the British pound is £1 = $1.70. What then is the cross rate between francs and pounds? Round your answer to two decimal p..

  When assets are distributed in bankruptcy proceeding

Which one of the following will generally have the highest priority when assets are distributed in a bankruptcy proceeding?

  What is the cash conversion cycle

What is the Cash Conversion Cycle (CCC)? Name the components of the CCC and explain why the CCC is important to business.

  What is the amount of the firms EBIT

What is the amount of the firm's EBIT?

  Company change throughout a company life

How might the financing needs of a company change throughout a company's life?

  What factors must you consider in making your decision

You can put the money in a money market account at your bank and pay off your car loan, or you can invest the money in mutual funds. What factors must you consider in making your decision?

  What is the monthly installment to pay back the annuity loan

Many farming households in the developing world use traditional biomass, kerosene and liquefied petroleum gas (LPG) for cooking and lighting. What are the internal rate of return (IRR) and payback period of the biogas investment – considering the sav..

  What will your credit card balance be in three months

You make $194 of new charges every month and make a payment of $151 every month. What will your credit card balance be in three months?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd