1. Tetron plc is a highly innovative, but risky, Electronics Company with a brand new product that has received excellent reviews in trade magazines. It has just paid a dividend of £0.9 pence per share, and its dividend is expected to grow at 20 per cent per annum for the next three years. By year 5 analysts expect that its dividend growth will have settled to the industry average of 2 per cent.
Risk free rate is 2% p.a.
Market risk premium is 8% p.a.
Tetron’s beta is 1.9.
Tetron’s share price is £10
Would you recommend purchasing Tetron’s shares at their current price? Show any calculations.