In residual dividend method:
Are dividend calculated after deducting equity contribution for capital expenditure only or working capital expenditure as well??
Honestly, and I’m not trying to be mean here, but couldn’t you run a couple examples and see for yourself? You might learn it better. Clearly you’re smart because you’ve made it to Level 2 but it seems like you ask a lot of questions that a little self research could answer and would set you up better in the long run.
I didn’t see it in the curriculum maybe because the working capital part tilts more to Equity section rather than capital budgeting, However, conceptually dividends under residual income model is the remaining portion of net income after covering next year’s equity portion of capital budget, this capital incorporates working capital as well doesn’t it ? then i will add it if it shows separately … because the other scenario if i didn’t add it how would the equity portion of the working capital be covered after i have declared dividends? no way else.