Please give me true answer this financial accounting question Assume NovaTech, Inc. has a current stock price of $60and will pay a $3 dividend in one year. Its equity cost ofcapital is 12%. What price must you expect NovaTechstock to sell for immediately after the firm pays thedividend in one year to justify its current price?

Step 1: Define Expected PriceThe Expected Price refers to the anticipated future price of an asset,…

Answered: Assume NovaTech, Inc. has a current…

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 NovaTech, Inc. has a current stock price of $60 and will pay a $3 dividend in one year. Its equity cost of capital is 12%. What price must you expect NovaTech stock to sell for immediately after the firm pays the dividend in one year to justify its current price?