(See) Common stock value: Variable growth Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed,
Question: Common stock value: Variable growth 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 \(\left(D_{0}=2.55\right)\). Grips' earnings and dividends are expected to grow at \(25 \%\) per year for the next 3 years, after which they are expected to grow at \(10 \%\) 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?
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