Tented plc has developed a new tent which has had rave reviews in the camping press. The company paid a dividend of 25p per share recently and the next is due in one year. Dividends are expected to rise by 15 per cent per year for the next five years while the company exploits its technological and marketing lead. However, after this period the growth rate will revert to only 7 per cent per year. The rate of return on risk-free securities is 5 percent and the risk premium on the average share has been 7 percent. Tented is in a systematic risk class which means that the average risk premium should be adjusted by a beta factor of 1.5. Calculate the value of one share of Tented plc.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Tented plc has developed a new tent which has had rave reviews in the camping press. The company paid a dividend of 25p per share recently and the next is due in one year. Dividends are expected to rise by 15 per cent per year for the next five years while the company exploits its technological and marketing lead. However, after this period the growth rate will revert to only 7 per cent per year. The rate of return on risk-free securities is 5 percent and the risk premium on the average share has been 7 percent. Tented is in a systematic risk class which means that the average risk premium should be adjusted by a beta factor of 1.5. Calculate the value of one share of Tented plc.
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