Kahn Inc. has a target capital structure of 60 percent equity and 40 percent debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a weighted average cost of capital (WACC) of 13 percent, its before-tax cost of debt is 10 percent, and its tax rate is 40 percent. The company's retained earnings are adequate to fund the common equity portion of the capital budget. The firm's expected dividend next year (D1) is $3 and the current stock price is $35.

a. What is the company's expected growth rate?

b. If the firm's net income is expected to be $1.1 billion, what portion of its net income is the firm expected to pay out as dividends?