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.