(1-b k -bk e,(1-b k(1-b)
( ) ( ) k (1- b) e 1- b = k - b.k e 1- b P = s 1 s s 1 0
P 0 e-k S Value is a function of future earnings, not future dividends
s 1 0 k e P = Value is a function of future earnings, not future dividends
Passive Residual Approach Dividends to be paid should be a residual variable or a passive variable Management does not manipulate dividends to achieve its objective
Passive Residual Approach ▪ Dividends to be paid should be a residual variable or a passive variable. ▪ Management does not manipulate dividends to achieve its objective