This last possibility can be described more generally. Assume that a firm's entity profit, i.e., pre-tax profit (before interest), HCPj*, in year j is given by:
HCPj* = Fj + tj + Dj + REj (24) where, in year j,
Fj = interest expense;
tj = tax expense; Dj = dividends paid; and, REj = retained earnings.