Confusion about the example of approximating monthly after-tax return in CFA textbook


Could anyone please help me with this example in the CFA textbook.

  1. “the intra-month after tax return” in the example means the after tax return for the holding period from the first day to the last day of a specific month?

  2. According to my understanding, modified Dietz method should only consider external cash flows. My confusion is that in this example, dividend is generated from the portfolio, so it should be an internal cash flow. Why should we add the time-weighted cash flow of receiving the dividend back to the initial value of the portfolio. I think the correct formula we use should be R - tax/value0. Please let me know if there is any flaws.

Thank you very much in advance.