Kahn inc has a target capital structure of 50 common equity, Ask an Expert

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Kahn Inc. has a target capital structure of 50% common equity and 50% debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 14%, a before-tax cost of debt of 11%, and a tax rate of 40%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $2 and the current stock price is $27.

a. What is the company's expected growth rate? Round your answer to two decimal places at the end of the calculations.

b. If the firm's net income is expected to be $1.5 billion, what portion of its net income is the firm expected to pay out as dividends? (Hint: Refer to Equation below.)

Growth rate = (1 - Payout ratio)ROE

Round your answer to two decimal places at the end of the calculations.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91608476

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