HI, I need answers to this question by tomorrow midnight central time. From Ceng

Question

HI, I need answers to this question by tomorrow midnight central time.

From Cengage Assignment 09-Stocks and Their Valuation Due on Mar 22 at 11:59 PM CDT 8. 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 $3.5000 dividend at that time (D3-$3.5000) and believes that the dividend will grow by 18.20% 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 3.90% per year. Goodwin's required return is 13.00%. 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 and Assuming that the marketsl are in squlibrium. Goodwin's current expected dividend y Goodwin's capital gains vield is

Explanation / Answer

D1 = 0

D2 = 0

D3 = 3.5

D4 = 3.5 (1.182) = 4.137

D5 = 4.137 (1.182) = 4.8899

D6 = 4.8899 ( 1.039) = 5.0806

Horizonal value = D6 / (ke - g) = 5.0806 / ( 0.13 - 0.039) = 55.83

Intrinsic value = Present value of (D3,D4,D5 and Horizonal value )

= 3.5 / (1.13)3 + 4.137 / 1.13)4 + 4.8899 / (1.13)5 + 55.83 / (1.13)5

= 37.92

Question - 2

Expected dividend yield = 9.10% ( 13% - 3.9%)

capital gain yield = 3.90 %

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