Business, 19.05.2020 22:20 amanda2517

Magnificent Manufacturing is considering the cash purchase of the common stock of the Total Tool Company. Total Tool just paid a dividend of $2.40 a share. Magnificent expects Total's earnings and dividends to grow at a 20% annual rate over the next two years and then at a 10% annual rate thereafter. What price should Magnificent Manufacturing pay for each share of Total Tools' common stock if its required rate of return is 18% on investments with risk characteristics similar to those of Total Tool? 43.22 Cannot be determined as growth rate is greater than the cost of capital 46.67 53.44 39.03

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