Financial accounting question Assume Nextech Corp has a current stock price of $75 and will paya $3 dividend in one year; its equity cost of capital is 12%. Whatprice must you expect Nextech stock to sell for immediately afterthe firm pays the dividend in one year to justify its current price?

Step 1: Analysis of information givenCurrent stock price (P0) = $75Dividend in one year (D1) =…

Answered: Assume Nextech Corp has a current stock…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 12P

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Assume Nextech Corp has a current stock price of $75 and will pay a $3 dividend in one year; its equity cost of capital is 12%. What price must you expect Nextech stock to sell for immediately after the firm pays the dividend in one year to justify its current price?