Question: Kirkland Motors expects to pay a $2.00 a share dividend on its common stock at the end of the year (i.e., D1 = $2.00). The stock currently sells for $20.00 a share.
The required rate of return on the company's stock is 12 percent (i.e., rs = 0.12). The dividend is expected to grow at some constant rate over time. What is the expected stock price five years from now?