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 $$5\mathrm{.}25$ dividend at that time $(D_3=$$$5\mathrm{.}25)$ and believes that the

dividend will grow by $27\mathrm{.}30\%$ 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 $4\mathrm{.}32\%$ per year.

Goodwin's required return is $14\mathrm{.}40\%.$ Fill in the following chart to determine Goodwin's horizon value at the horizon date$-$when constant growth

begins$-$and the current intrinsic value.

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