Rylan Industries is expected to pay a dividend of $5.20 per share for the next four years. If the current price of Rylan stock is $32.63, and Rylan's equity cost of capital is 14%, what price would you expect Rylan's stock to sell for at the end of the four years?

Question

Quizplus · Accepted Answer

The stock price at the end of four years can be calculated using the dividend discount model. The present value of dividends is subtracted from the current stock price, and the remainder is compounded at the equity cost of capital for four years.

Rylan Industries Is Expected to Pay a Dividend of $5