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 $5.5000 dividend at that time (D $5.5000) and believes that the dividend will grow by 28.60% for the following two years (D4 and D5). However, after the fifth year, she expects Goodwin's dividend to grow at a constant rate of 4.38% per year.
Goodwin's required return is 14.60%. 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, carry the dividend values to four 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 opportunities are poor.
Is this statement a possible explanation for why the firm hasn't paid a dividend yet?
A. True
B. False

Assuming that the markets are in equilibrium, Goodwin's current expected dividend yield is and Goodwin's capital gains yield is 0(it pays no dividends).

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 opportunities are poor.

Is this statement a possible explanation for why the firm hasn't paid a dividend yet?

B. False

Generally companies that are experiencing a rapid growth do not pay dividends, because they need all the cash that they can use to finance their expansion. Sometimes mature companies that have a steady growth rate will also choose not to pay dividends because they consider themselves as solid investments and not paying dividends allows them to grow more and should increase stockholders' wealth more.

Explanation:

D₃ = $5.50

D₄ = $7.073

D₅ = $9.096

D₆ = $9.642 (and a constant growth rate of 4.38%

Re = 14.60%

horizon value at year 5 = $9.642 / (14.6% - 4.38%) = $94.3444

intrinsic value P₀ = $94.3444 / 1.146⁵ = $47.73

tallinn tallinn · Answer 2 · 2022-04-12T11:55:52+02:00

Supposing that the markets are in equilibrium, Goodwin's current common dividend yield is and Goodwin's capital gains result is 0(it pays no dividends). False.

What is Markets Equilibrium?

The horizon value at year 5 is = $94.3444

current intrinsic intrinsic value P₀ is = $47.73

Considering when the markets are in equilibrium, Also Goodwin's current common dividend yield is and also Goodwin's capital gains yield is 0(it pays no dividends).

Goodwin has been extremely successful, but it hasn't paid a premium yet. It disseminates a report to its key investors including the subsequent declaration:

Goodwin's investment opportunities are lacking.

B. False

Commonly, companies that are undergoing rapid evolution do not pay dividends, because they require all the cash that they can use to finance their development.

Sometimes when mature companies that have a steady growth rate will also when choose not to pay dividends because they consider themselves solid investments and not paying dividends allows them to grow more and also should increase stockholders' wealth more.

Then, D₃ = $5.50

After that, D₄ = $7.073

Then, D₅ is = $9.096

After that, D₆ = $9.642 (and a constant growth rate of 4.38%

Then, Re = 14.60%

Then, horizon value at year 5 = $9.642 / (14.6% - 4.38%) = $94.3444

Therefore, intrinsic value P₀ = $94.3444 / 1.146⁵ = $47.73

Find more information about Markets Equilibrium here:

https://brainly.com/question/12252562