[Solved] (a) It uses a pure residual policy with all distributions in the form of dividends (35% of the $7.3 million investment is financed with debt).



Question: (a) It uses a pure residual policy with all distributions in the form of dividends (35% of the $7.3 million investment is financed with debt).

(b) It employs a regular- dividend-plus-extras policy, with the regular dividend being based on the long-run growth rate and the extra dividend being set according to the residual policy.

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