Q. The net income of Novis Corporation is $45000. The company has 20000 shares and a 100 percent payout policy. The expected value of the company one year from now is $1635000. The appropriate discount rate for Novis is 12 percent and the dividend tax rate is zero.

a. Illustrate what is the current value of the company assuming the current dividend has not yet been paid?

b. Illustrate what is the ex-dividend price of Novis's stock if the board follws 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 $4.60 dividend.

i. Comment on the claim that the low dividend is depressing the stock price. Support your argument with calculations.

ii. If the proposal is adopted, at illustrate what price will the new shares sell? Explain how many will be sold?