Considering cash purchase of stock of grips tool

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Reference no: EM131883944

Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just? completed, Grips earned ?$4.04 per share and paid cash dividends of ?$2.34 per share (D0equals=$ 2.34). Grips' earnings and dividends are expected to grow at 20?% per year for the next 3? years, after which they are expected to grow 88?% per year to infinity. What is the 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?

Reference no: EM131883944

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