Net profit after tax: 6000 * (1-60%) * 0.75 =1800.
Net debt = shareholders' equity =4000/2=2000
20 17
Entity cash flow =1800 *1.05-4000 * 0.05 =1690.
Net debt = shareholders' equity = 4000 *1.05/2 = 2100.
After-tax interest expense =2000*8%*0.75= 120
Debt cash flow = 120- 100=20
Equity cash flow =1690-20 =1690-20 =1670.
2) Cost of equity capital =8%*0.75+5%= 1 1%
The value of each share at the end of 20 16 is based on the equity cash flow of the next year =1670/1000 =1.67.
Sustainable growth model = value per share =1.67/(11%-5%) = 27.83.