Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.58 per share and paid cash dividends of $1.88 per share (D0equals$ 1.88). Grips' earnings and dividends are expected to grow at 25% 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 12% on investments with risk characteristics similar to those of Grips?
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Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just...
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