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THE HANDBOOK OF CORPORATE FINANCE A Business Companion to Financial Markets, Decisions and Techniques Chapter 1 or 2 or 4 or 6 or 7 or

THE HANDBOOK OF CORPORATE FINANCE A Business Companion to Financial Markets, Decisions and Techniques Chapter 1 or 2 or 4 or 6 or 7 or 8 or 10 or 20 or 11 or 19 or 13.

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  1. Foodie plc has developed a new flavour which has had rave reviews in the nutrition press. The company paid a dividend of 120 baiza per share recently and the next is due in one year. Dividends are expected to rise by 20 per cent per year for the next four years while the company exploits its technological and marketing lead. After this period, however, the growth rate will revert to only 7 per cent per year. The rate of return on risk-free securities is 6 per cent and the risk premium on the average share has been 5 per cent. Foodie is in a systematic risk class which means that the average risk premium should be adjusted by a beta factor of 1.2. Calculate the value of one share in Foodie plc.

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