Kahn Inc. has a target capital structure of 60% common equity and 40% debt to fund its $8 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 13%, a before-tax cost of debt of 8%, 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 $31.What is the company's expected growth rate? Do not round intermediate calculations. Round your answer to two decimal places. % 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)ROEDo not round intermediate calculations. Round your answer to two decimal places. %

(1) It is assumed that face value of share is $ 10 Total Assets = 8 billions common equity = 8…

Answered: Kahn Inc. has a target capital…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

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Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

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Kahn Inc. has a target capital structure of 60% common equity and 40% debt to fund its $8 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 13%, a before-tax cost of debt of 8%, 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 $31.

What is the company's expected growth rate? Do not round intermediate calculations. Round your answer to two decimal places.
%

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

Do not round intermediate calculations. Round your answer to two decimal places.
%

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