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TopGolf. is entering into an expansion phase and is considering locations Atlantic Canada. In order to fund the expansion, the company does not expect to
TopGolf. is entering into an expansion phase and is considering locations Atlantic Canada. In order to fund the expansion, the company does not expect to pay any dividends for the next two years. Topgolf is considering 2 options for the expansion: Option #1: Open a location Bayers Lake. If they select this option, management expects to begin to pay dividends of $3.25 at the end of year 3, then they expect that dividends will grow at a rate of 7% forever. Based on the risk assessment of this project, investors will have a required return of 15%. Option #2: Open a new location in Moncton. If they select this option, management believes that they will pay a smaller dividend of $2.20 at the end of year 3 and year 4. Management predicts this option would then allow the dividends to grow at a rate of 10% forever. They believe this option is riskier since there is a smaller local market, but it is more centrally located in the Maritimes. Investors required return for this option would be 17%. As a shareholder, which option would you prefer? Show your work
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