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 $5.25000 dividend at that time (D₃ = $5.25000) and believes that the dividend will grow by 27.30000% 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 4.32000% per year. Goodwin’s required return is 14.40000%. 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    .

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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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 $5.25000 dividend at that time (D₃ = $5.25000) and believes that the dividend will grow by 27.30000% 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 4.32000% per year.
Goodwin’s required return is 14.40000%. 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    .
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