Ch 09: Assignment - Stocks and Their Valuation 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 $5.25000 dividend at that time (D, = $5.25000) and believes that the dividend will grow by 27.30000% for the following two years (D. and D.). However, after the fifth year, she expects Goodwin's dividend to grow at a constant rate of 4.32000% per year. Goodwin's required return is 14.40000%. 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. Term Value Horizon value 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's investment opportunities are poor. Is this statement a possible explanation for why the firm hasn't paid a dividend yet? No Yes On den Vord 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. Blur Corp. has an expected net operating profit after taxes, EBIT(1-T), of $7,600 million in the coming year. In addition, the firm is expected to have net capital expenditures of $1,140 million, and net operating working capital (NOWC) is expected to increase by $10 million. How much free cash flow (FCF) is Blur Corp, expected to generate over the next year? $6,470 million $119,668 million $6,450 million 58,730 million Blur Corp.'s FCs are expected to grow at a constant rate of 4.62% per year in the future. The market value of Blur Corp.'s outstanding debt is $31,412 million, and its preferred stocki" value is $17,451 million Blur Corp, has 150 million shares of common stock outstanding, and its weighted average cost of capital (WACC) quals 13.86% Value (Millions) Term Total firm value intrinsic value of common equity Intrinsic value per share Using the preceding information and the FCF you calculated in the previous question calculate the appropriate values in this tablet Assume the firm has no nonoperating assets MAR