In: Finance
Please use EXCEL to answer and show all formulas. I can't understand the answer if I can't see the formulas for each field. Thank you very much.
Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $4.25 per share and paid cash dividends of $2.55 per share (D0=$2.55). Grips' earnings and dividends are expected to grow at 25% per year for the next 3 years, after which they are expected to grow 10% per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 15% on investments with risk characteristics similar to those of Grips?