PS6 - Problem Set #6 Finance 357 Business Finance Please...

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Problem Set #6 Finance 357 Business Finance Please note that you do not have to submit your answers. They will not be graded. But, similar questions will appear in the quiz. Answer keys will be uploaded at Blackboard soon. 1. ( Irrelevance of Dividend Policy ) The net income of Novis Corporation, which has 10,000 outstanding shares and a 100 percent payout policy, is $32,000. The expected value of the firm one year hence is $1,545,600. The appropriate discount rate for Novis is 12 percent. a. (2 points) What is the current value of the firm? b. (2 points) What is the ex-dividend price of Novis’s stock if the board follows its current policy? c. At the dividend declaration meeting, several board members claimed that the dividend is too meager and is probably depressing Novis’s price. They proposed that Novis sell enough new shares to finance a $4.25 dividend. (1) (2 points) Comment on the claim that the low dividend is depressing the stock price. Support your argument with calculations. [
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PS6 - Problem Set #6 Finance 357 Business Finance Please...

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