Final answer:
To estimate the price of Royal Ranch House stock in 8 years, we can use the Gordon Growth Model. I estimate the price of Royal Ranch House stock in 8 years to be $141.26.
Step-by-step explanation:
To estimate the price of Royal Ranch House stock in 8 years, we can use the Gordon Growth Model. This model calculates the stock price based on the expected dividends and the growth rate.
First, we need to calculate the expected dividend in year 9. We can do this by multiplying the dividend in year 8 by 1 plus the growth rate: (Dividend in year 8) * (1 + Growth rate). Then, we divide the expected dividend in year 9 by the required rate of return (which is not given in the question) to get the stock price in year 8. Finally, we discount this stock price back to the present value using the required rate of return and the time period.
Let's say the required rate of return is 8%. First, calculate the expected dividend in year 9: $19.70 * (1 + 4.10%) = $20.50. Next, calculate the stock price in year 8: $20.50 / 8% = $256.25. Finally, discount the stock price back to the present value: $256.25 / (1 + 8%)^8 = $141.26. Therefore, I estimate the price of Royal Ranch House stock in 8 years to be $141.26.