Assignment 09-Stocks and Their Valuation O Due Today at 11 PM EDT 9. Stocks that

Question

Assignment 09-Stocks and Their Valuation O Due Today at 11 PM EDT 9. Stocks that don't pay dividends yet a relatively young company, has been wildly successful but has yet to pay a dividend. An Goodwin Technologies, analyst forecasts that Goodwin is likely to pay its first dividend three years from now. She expects $1.5000 dividend at that time ( two years (D4 and Ds). However, after the fifth year, she expects Goodwin's dividend to grow at a constant rate of 3.42% per year. rs from now. She expects Goodwin to pay a D3 = $1.5000) and believes that the dividend will grow by 7.80% for the following Goodwin's required return is 11.40%. Fil 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. Value $22.59 Current Intrinsic value $16.33 Term Horizon value Assuming that the markets are in equilibrium, Goodwin's current expected dividend yield is Goodwin's capital gains yield is . . , and 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: F5 2 3 4 6

Explanation / Answer

Since Goodwin is not paying dividend curently expected dividend yield is Zero. If markets are in Equillibrium , all growth will be capital gain yield which should be same as required rate of return i.e 11.4 %

Answering to 2nd Part- The statement is contradictory . Generally organisation does not pay dividend when there are better business oppurtunities.If i nvestment oppurtunities are ppor Goodwin should return back the profit back to shareholders. Hence the statement is not and explanation to why it does not distribute dividends

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