If investor plans to hold a stock for two years, the value of the stock is the present value of the expected dividend in first year, plus the present value of the expected dividend in second year, plus the present value of the expected selling price at the end of two years.
The expression for the DDM value of a share of stock for any finite holding period is a straightforward extension of the expressions for one-year and two-year holding periods. For an n-periods model, the value of a stock is the present value of the expected dividends for the n periods plus the present value of the expected price in n periods.
In the limit, if we let the holding period extend into the indefinite future, the stock’s value is the present value of all expected future dividends.
