8. Stocks that don't pay dividends yet Goodwin Technologies, a relatively young company, has been wildly successful but has yet to pay a dividend. An analyst forecasts that Goodwin is likely to pay its first dividend three years from now. She expects Goodwin to $2.0000 dividend at that time (D3 $2.0000) and b two years (D, and Ds). However, after the fifth year, she expects Goodwin's dividend to grow at a constant rate of 3.54% per year. pay a elieves that the dividend will grow by 10.40% for the following Goodwin's required return is 11.80%. Fill in the following chart to determine Goodwin's horizon value at the horizon date-when constant growth begins-and the current intrinsic value. To increase the accuracy of your carry the dividend values to four decimal places. Term Value Horizon value Current Intrinsic value Assuming that the markets are in equilibrium, Goodwin's current expected dividend yield is , and 9.20% 0.00% 10.16% 7.98% Goodwin's capital gains yield is Goodwin has been very successful, but it hasn't paid a dividend yet. It circulates a report to res key Tnvestors containing the following statement: Goodwin has yet to record a profit (positive net income). Is this statement a possible explanation for why the firm hasn't paid a dividend yet? O No Yes 9. Corporate valuation model Aa Aa The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value-added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFs) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. Randall and Arts Inc. has an expected net operating profit after taxes, EBIT(1 - T), of $2,400 million in the coming year. In addition, the firm is expected to have net capital expenditures of $360 million, and net operating working capital (NOWC) is expected to increase by $40 million. How much free cash flow (FCF) is Randall and Arts Inc. expected to generate over the next year? O $2,000 million O $2,720 million O $2,080 million O $69,106 million Randall and Arts Inc.'s FCFs are expected to grow at a constant rate of 2.46% per year in the future. The market value of Randall and Arts Inc.'s outstanding debt is $18,293 million, and preferred stocks' value is $10,163 million. Randall and Arts Inc. has 600 million shares of common stock outstanding, and its weighted average cost of capital (WACC) equals 7.38%. Using the preceding information and the FCF you calculated in the previous question, calculate the Term Value (Millions) Total firm value Value of common equity Intrinsic value per share appropriate values in this table. $37.26 $36.26 $20.32 $50.81