Ch $09-$ Assignment $-$ Stocks and Their Valuation

Attempts

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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 pay a $$1\mathrm{.}75000$ dividend at that time $)=($$$1\mathrm{.}75000$ and believes that the dividend will grow by $9\mathrm{.}10000\%$ for the following two years $(D_4$ and $D_5).$ However, after the fifth year, she expects Goodwin's dividend to grow at a constant rate of $3\mathrm{.}48000\%$ per year.

Goodwin's required return is $11\mathrm{.}60000\%.$ 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 calculations, do not round your intermediate calculations, but round all final answers to two decimal places.

$\backslash$table$[[$Term$,$Value,$],[$Horizon value,grad,$]]$

Current intrinsic value

Assuming that the markets are in equilibrium, Goodwin's current expected dividend yield is $\_,$ and Goodwin's capital gains yield is

Goodwin has been very successful, but it hasn't paid a dividend yet. It circulates a report to its key investors containing the following statement:

Goodwin has a large selection of profitable investment opportunities.

Is this statement a possible explanation for why the firm hasn't paid a dividend yet?

No

Yes