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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
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 $4.5000 dividend at that time (D3 = $4.5000) and believes that the dividend will grow by 23.40% for the following two years (D4 and D5). However, after the fifth year, she expects Goodwin's dividend to grow at a constant rate of 4.14% per year. Goodwin's required return is 13.80%. 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 calculations carry the dividend values to four decimal places. If investors expect a total return of 14.80%, what will be Goodwin's expected dividend and capital gains yield in two years-that is, the year before the firm begins paying dividends? Again, remember to carry out the dividend values to four decimal places
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