FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just​ completed, Grips earned ​$3.53 per share and paid cash dividends of ​$1.83 per share ​(D Subscript 0=$1.83​). Grips' earnings and dividends are expected to grow at 40​% 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 11​% on investments with risk characteristics similar to those of​ Grips?  
 
The maximum price per share that Newman should pay for Grips is 
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