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Section C (4 Mark)Your broker recommends that you purchase XYZ Inc.

Section C (4 Mark)

Your broker recommends that you purchase XYZ Inc. at Rs.60. The stock pays a Rs.2.40 dividend which (like its per share earnings) is expected to grow annually at 8 percent. If you want to earn 12 percent on your funds, is this a good buy?

A.

Price of the stock is overvalued, so should buy

B.

Price of the stock is undervalued, so should buy

C.

Price of the stock is overvalued, so should not buy

D.

Price of the stock is undervalued, so should not buy

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