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Corporate Finance · Quiz 1 · 27 Oct 2024 · September 2024 term

Question 18: The LIC stock is trading at Rs 400 today. LIC is expecte…

Question 18

+4 marksOne correct option

The LIC stock is trading at Rs 400 today. LIC is expected to pay dividend of Rs 30 per share next year. If the growth rate of LIC dividend is 4% every year and appropriate rate of return is 10% per year, then according to the Gordon growth model

  1. A

    The LIC stock is underpriced, and an investor should buy LIC shares.

  2. B

    The LIC stock is overpriced, and an investor should buy LIC shares.

  3. C

    The LIC stock is underpriced, and an investor should sell LIC shares.

  4. D

    The LIC stock is overpriced, and an investor should sell LIC shares.

Show answer

Correct answer

  • A

    The LIC stock is underpriced, and an investor should buy LIC shares.

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Question 18 of 25 in the IIT Madras BS Corporate Finance (Corporate Finance) Quiz 1 paper sat on 27 Oct 2024, in the September 2024 term (IIT M DEGREE AN EXAM QDB2 27 Oct 2024). It carries 4 marks.

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