The ex-dividend price of novis stock, Financial Management

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The net income of Novis Corporation is $45,000.  The company has 20,000 outstanding shares and a 100 percent payout policy.  The expected value of the firm one year from now is $1,635,000.  The cost of capital of the company is 12 percent, and the dividend tax rate is zero.

a.    What is the present value of the firm suppose the current dividend has not yet been paid.?

b.      What is the ex-dividend price of Novis stock?

c.    At the dividend declaration meeting, some board members proposed that Novis sell enough new shares to finance a $4,60 dividend, arguing that the low dividends are depressing the stock price.   Do you agree that the low current dividend is depressing the stock price?  If the proposal is adapted, at what price will the new shares sell?  How many will be sold?


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