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Madhodha Khumalo currently owns 10 000 shares of Amanzi Bottling Company and requires a retum...

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Madhodha Khumalo currently owns 10 000 shares of Amanzi Bottling Company and requires a retum of 20% on these shares. The entrance of new players in the water bottling industry has seriously affected Amanzi's operating performance. The company's research and development team has invented a new bottling machine and this will significantly cut the company's operating costs. As a result of this innovation, analysts expect Amanzi's earnings and dividends to grow by 20%, 15% and 10% in 2018, 2019 and 2020 respectively. Analysts expect that the dividends will grow at 5% from 2021 into the foreseeable future. In the just ended 2017 financial year Amanzi paid a dividend of E5.00 per share. Required: Calculate the value of Mr Khumalo's shares in Amanzi Bottling Company. (10 marks: 18 minutes)

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