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Do you suggest rajan to purchase the share

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Mr. Rajan Tiwari is planning to invest in the equity stocks of Xerox India Limited. The current share price is Rs.150 per share. Xerox has declared a dividend of Rs.10 per share for the current year. Mr. Tiwari is of the opinion that the dividend per share will remain at the same level for the next two years, after which it will grow at the rate of 25% per annum in the third and fourth years. From the fifth year onwards, dividends are expected to grow at a normal rate of 12% per annum. If the required rate of return of Mr. Tiwari is 14% per annum, do you suggest him to purchase the share at the current price.

Intrinsic value of the stock is Rs.551.98 and it is recommended to purchase the share

Intrinsic value of the stock is Rs.551.98 and it is nor recommended to purchase the share.

Intrinsic value of the stock is Rs.517.83 and it is recommended to purchase the share.

Intrinsic value of the stock is Rs.517.83 and it is not recommended to purchase the share

Intrinsic value of the stock is Rs.150 and it is recommended to purchase the share.

Reference no: EM13845865

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