Leblanc inc. currently has earnings of $10 per share, and investors expect that the earnings per share will grow by 3 percent per year. furthermore, the mean pe ratio of all other firms in the same industry as leblanc inc. is 15. leblanc is expected to pay a dividend of $3 per share over the next four years, and an investor in leblanc requires a return of 12 percent. what is the forecasted stock price of leblanc in four years, using the adjusted dividend discount model?

Stock Price of LeBlanc in four years = $37.517

Explanation:

Dividend Discount model is as follows:

Where,

= Price of share at end of four years

= Dividend to be paid at end of 5th year

= return on equity or cost of equity

g = growth rate

Now we have the information as follows:

Dividend at 5th year end = ((($3 per share + 3%) + 3%) + 3%) +3% = 3.765

Cost/ Return on equity = 12%

Growth rate = 3%

Therefore price =

=

Stock Price of LeBlanc in four years

= $37.517

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