Goodwin Technologies, a relatively young company, has been wildly successful but has yet to pay a dividend. An analyst forecsts that Goodwin is likely to pay its first dividend three years from now. She expects Goodwin to pay a $2.00 Dividend at that time and believes that the dividend will grow by 10.40% 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 3.54% per year.
Goodwin's required return is 11.80% Fill in the following chart to determine Goodwin's horizon value at the horizon date- when constand growth begins- and the current intrinsic value. To increase the accuracy of your calculations, carry the dividend values to four decimal places
Horizon value=
Current intrinsic value=
If investors expect a total return of 12.80%, what will be Goodwin's expected dividend and capital gains yield in two years-- that is,the year before the firm begins payig dividends? Again, remember to carry out the dividend values to four deciamal places (hint: you are at year 2, and the first dividend is expecte to be paid at the end of the year. FInd DY3 and CGY3
Expected dividend yield=
Expected Capital gains yield=