Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just​ completed, Grips earned ​$3.68 per share and paid cash dividends of ​$1.98 per share ​(D0=$1.98​). ​ Grips' earnings and dividends are expected to grow at 25​% 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 14​% on investments with risk characteristics similar to those of​ Grips?

DFB, Inc. expects earnings next year of $4.48 per share, and it plans to pay a $2.54 dividend to shareholders (assume that is one year from now). DFB will retain $1.94 per share of its earnings to reinvest in new projects that have an expected return of 15.7% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next dividend is due in one year. a. What growth rate of earnings would you forecast for DFB? b. If DFB's equity cost of capital is 11.8%, what price would you estimate for DFB stock today? c. Suppose instead that DFB paid a dividend of $3.54 per share at the end of this year and retained only $0.94 per share in earnings. That is, it chose to pay a higher dividend instead of reinvesti in as many new projects. If DFB maintains this higher payout rate in the future, what stock price would you estimate for the firm now? Should DFB raise its…

XYZ corporation is expecting free cash flow of $100 million next year, and it will grow by 3% per year indefinitely afterward. XYZ’s discount rate is 12%. XYZ has $300 million worth of long term bonds outstanding, and 10 million shares of stock outstanding. What is a fair value for a share of XYZ? Do not include the $ sign and answer to the nearest $0.01.

Ninja Co. Will pay a dividend of $5.00, which will increase by 8 percent each year over the following three years and then grow at an annual rate of 6 percent forever. You expect a 11 percent return on your invested capital. What price would you pay for a share in this company? (Do not round "PV factor" and other intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)