Kahn Inc. has a target capital structure of 5 5 % common equity and 4 5 %

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Question:

Kahn Inc. has a target capital structure of

55 %

common equity and

45 %

debt to fund its $

8

billion in operating assets. Furthermore, Kahn Inc. has a WACC of

16 %,

a before

-

tax cost of debt of

10 %,

and a tax rate of

25 % .

The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year

(

1)

is $

4,

and the current stock price is $

34 .

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 $

1.1

billion, what portion of its net income is the firm expected to pay out as dividends? Do not round intermediate calculations. Round your answer to two decimal places.

(

Hint: Refer to Equation below.

)

Growth rate

= (1 -

Payout ratio

)

ROE

%

Posted Date: May 18, 2024 02:04 PM

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Kahn Inc. has a target capital structure of 5 5 % common equity and 4 5 %

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