Finance School of management The discounted dividend model a Using the same logic employed to derive Pos the expected price of stock at the beginning of the second year is D+p 1+k u By substitution we can express p in terms of 152s and p D. +p 1+k(1+k)2 uesTc9 Finance School of Management The Discounted Dividend Model ❑ Using the same logic employed to derive P0 , the expected price of stock at the beginning of the second year is: 2 2 1 1 D P P k + = + ❑ By substitution, we can express P0 in terms of D1 , D2 , and P2 : 1 2 2 0 2 1 (1 ) D D P P k k + = + + +