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Due to rapid urbanization and overwhelming growth in the middle class population, Indian automobile sector is expected to have a flourishing growth. The current market
Due to rapid urbanization and overwhelming growth in the middle class population, Indian automobile sector is expected to have a flourishing growth. The current market price of shares of two automobile companies Speed Motors and Adventure Motors are Rs. 60 and Rs. 100 respectively. Both companies have track record of paying dividends. The companies are expected to declare annual dividend of Rs. 1.5 and Rs. 2.5 respectively over the next year. Projected EPS of Speed Motors and Adventure Motors are Rs. 2.5 and Rs. 4 respectively. Speed Motor's dividend is expected to grow at 10% per annum and Adventure Motor's by 9% per annum. Financial analyst estimated the likely prices for the year ahead on two stocks to be Rs. 66, Rs. 72, and Rs. 75 for Speed and Rs. 114, Rs. 126 and Rs. 132 for Adventure. Which stock you are supposed to pick given that you required rate is 12%
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