3 2015 - Dec [3] {C} (b) Consider two companies - Alpha Limited and Beta Limited. Both have announced their annual results for 2014-2015 on May 5, 2015 and as per the reported results both are having identical Profit After Tax (PAT) of 7,125 lakhs and 120 lakhs equity shares outstanding (face value of each share is ? 10). Both the companies having same net worth of 28,500 lakhs. 2 Alpha Limited has growth plans in future and accordingly, it has decided to have a low payout of 40% as dividend. It is believed that its earnings will increase by present rate of growth every year in perpetuity. Assume that the Beta Limited has growth plans in future, but not very ambitious and due to company is having the required rate of return on equity of 17% a year. 2 that, it is going to have a dividend payout of 60%. It is believed that its earnings will increase by the present rate of growth every year in perpetuity. asume that the company is having the required rate of return on equity of S a year. Assume that both the companies are identical in all other veds. Calculate P/E Ratio assuming that constant Growth Model works. to explain why a particular company is having higher P/E Ratio. (8 + 2 =10 marks)