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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 $ dividend at that time $ and believes that
the dividend will grow by for the following two years and However, after the fifth year, she expects Goodwin's dividend to grow at
a constant rate of per year.
Goodwin's required return is 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 obvortunities are poor.
Is this statement a possible explanation for why the firm hasn't paid a dividend yet?
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