Reference no: EM133098703

Question - The price earning of alpha Plc is well above the average for stock market, reflecting its market standing as a growth company. The earning performance of the company in recent years has not disappointed its shareholders earning has grown at an average rate of 20% over the last five years. Whilst this has been partly a result of a high level of retentions, the company has consistently reinvested 80% of the earning. The high profitability of investment has also played a role. Now, competition is intensifying, and the rate of return on the new assets is expected to fall over the next few years.  Investments undertaken next year are expected to yield 22% those stated in the following year 18% and those in three years 12% and by year four investment are expected to generate no more than the minimum rate of return required by shareholders of 10% earning next year is expected to be TZS600.00 million and the company is expected to reinvest 80% of the earning as in the past few years. After this, retentions will be reduced as investment opportunities diminish 60% in year 2, 40% in year 3 and 20% which is expected to be the average in the longer term

Required -

1. Estimate the current value of the company?

2. What will the value of the share be after the end of three years?

3. What rate of return has the company been earning on its capital investment program in recent years?

4. What is the firm's price earnings ratio based on its expected next year?

5. What proposion of the value is accounted for by growth opportunities?