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 $1.50 dividend at that time—therefore, Stocks that don't pay dividends yet Goodwin Techno = $1.50—and believes that the dividend will grow by 7.80% for the following two years, and . However, after the fifth year, she expects Goodwin’s dividend to grow at a constant rate of 3.42% per year. The required return on Goodwin’s securities is 11.40%.

Complete the following table after determining the horizon value, or the value of Goodwin’s stock at the end of year—when the constant growth rate begins—and the current intrinsic value or value of Goodwin Technologies’ stock.

Term Value
Horizon value of Goodwin’s stock at the end of year 5
Current intrinsic value of Goodwin Technologies’ stock
Assuming that the markets are in equilibrium, Goodwin’s current expected dividend yield is0.00% , and its capital gains yield is11.40% .

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 has a large selection of profitable investment opportunities.

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

a. Yes
b. No