In calculating residual dividend policy, we should consider the followings;
Amount of new project for example 15. Company debt/equity = 15/85. company earning= 25
15 * .85= 12.75.
Residual dividends= 25-12.75= 12.25
In the link below U can find two qestions.
- From CFAI-EOCQ
- From Elanguides PQ’s
Elanguides used the sam method as mentioned above.
CFAI used the following methods- for example;
Residual dividends= 21-15=10
What is the reason you can review the question in the link below.
I think because the question stated that "the amount will be funded enterily by thus year earning? Is it right? Or there is another reason?