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Assignment Question:
Mr. A, a short period investor, always looks for the stocks offering quick gains in
the market. He has now Rs. 100,000 with him and wants to invest in XYZ
Company. He has come to know that XYZ Company is going through a difficult
financial period. Over the past three years, its stock price has dropped from Rs. 50
to Rs. 20 per share. Throughout this decline, XYZ Company has managed to pay
a Re. 1 dividend each year. The company’s management feels that the worst is
over and expects the dividends to grow at 6% per year for next three years.
Afterwards, they plan to increase it by 9% per year indefinitely. Comparable
stocks are returning 13%.
For taking an investment decision, Mr. A relies upon both fundamental and
technical analyses. He uses to consult various charts including line chart, to
predict the price trends in the shorter period. For that purpose, he has plotted the
following line graph by using recent date of historical, current and forecasted
prices of XYZ Company’s stock:
DUE DATE: 21ST MAY, 2014

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