Tented plc has developed a new tent which has had rave reviews in the camping press. The company paid a of 11p per share recently and the next is due in one year. Dividends are expected to rise by 25 per cent per year for the next five years while the company exploits its technological and marketing lead. After this period, however, the growth rate will revert to only 5 per cent per year.
The rate of return on risk-free securities is 7 per cent and the risk premium on the average share has been 5 per cent. 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 in Tented plc.