Question
What is the formula used in the question below? Please explain step by step. Question : Timco expects net income of 47 million. They have
What is the formula used in the question below? Please explain step by step.
Question :
Timco expects net income of 47 million. They have identified 60 million in positive NPV investments. They use half debt and half equity in their capital structure. Find the residual dividend.
Answer
To purchase the projects, Timco needs 30 million in retained earnings. The rest will come from new debt. 47-30=17 million leftover for the residual dividend.
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
10th Canadian edition
1259261018, 1259261015, 978-1259024979
