Horizon value options : $27.12, $38.75, $46.50, $32.94
current intrinsic value options: $27.94, $25.37, $27.14,
$10.35
expected dividend yield options : 8.24%, 0.00%, 9.21%,
10.41%
capital gains yield options: 27..14%, 12.200000%,
21.7925%, 38.75%
- Horizon Value Options 27 12 38 75 46 50 32 94 Current Intrinsic Value Options 27 94 25 37 27 14 10 35 E 1 (65.43 KiB) Viewed 34 times
9. 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 $2.50000 dividend at that time (D = $2.50000) and believes that the dividend will grow by 13.00000% for the following two years (D4 and Ds). However, after the fifth year, she expects Goodwin's dividend to grow at a constant rate of 3.66000% per year. Goodwin's required return is 12.20000%. 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: Investors prefer the deferred tax liability that capital gains offer over dividends. Is this
statement a possible explanation for why the firm hasn't paid a dividend yet? O No 0 Yes