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Sir i understood the answer up until the last line:
Distribution % required = ($34·387 million/$36 million) x 100% = 95·5%what does this line mean?
At the moment Arthuro is receiving 60% of Bowerscots post-tax profits as dividend.
However they want this % to increase so that Arthuro is able to pay a dividend of $0.74 per share.
When B pays 60% as dividend, A receives $20,520 (workings 3), and therefore the dividend capacity of A is $76,652 ((workings 1).
However, A wants to be able to pay a dividend of 120M x $0.74 = $88,800.
So they need to get an extra $34,387 from B. This is 34,387/36,000 = 95.5% of B’s post tax profit.
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