A firm follows the residual dividend policy. This firm also uses a capital structure policy...
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Finance
A firm follows the residual dividend policy. This firm also uses a capital structure policy where the optimal weight of equity is ws , where ws < 1.
(a) If the firm is expecting earnings after taxes equal to Y what is the algebraic expression for the maximum amount of total capital (C*) that can be raised without issuing additional equity capital in the form of new shares?
(b) Develop the expression for the amount of dividend that can be paid by this firm that follows the residual dividend policy for the entire range of total capital to be raised, C , ranging from 0 to presumably , i.e., for 0 < C < .
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