A. Kahn Inc. has a target capital structure of 50% common equity and 50% debt...
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A. 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 13%, a before-tax cost of debt of 9%, 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 (D1) is $4, and the current stock price is $29.
i. What is the company's expected growth rate? Do not round intermediate calculations. Round your answer to two decimal places. _______ %
ii. If the firm's net income is expected to be $1.4 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 ______ %
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