Kahn Inc. has a target capital structure of 60% common equity and 40% debt to fund its $12 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 12%, a before-tax cost of debt of 12%, 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 (D:) is $2, and the current stock price is $29. What is the company's expected growth rate? Do not round intermediate calculations. Round your answer to two decimal places. b. If the firm's net income is expected to be $1.8 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 Equation below.) Growth rate - (1 - Payout ratio)ROE
Kahn Inc. has a target capital structure of 60% common equity and 40% debt to fund its $12 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 12%, a before-tax cost of debt of 12%, 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 (D:) is $2, and the current stock price is $29. What is the company's expected growth rate? Do not round intermediate calculations. Round your answer to two decimal places. b. If the firm's net income is expected to be $1.8 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 Equation below.) Growth rate - (1 - Payout ratio)ROE
Chapter12: The Cost Of Capital
Section: Chapter Questions
Problem 9P
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Kahn Inc. has a target capital structure of 60% common equity and 40% debt to fund its $12 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 12%, a before-tax cost of debt of 12%, 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 (D;) is $2, and the current stock price is $29.
a. What is the company's expected growth rate? Do not round intermediate calculations. Round your answer to two decimal places.
%
b. If the firm's net income is expected to be $1.8 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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff2dda4cd-20cb-49bc-a4f1-ce9acba1a16c%2F184b68ed-28b7-4c83-823a-089ef9ce8638%2F7b4e19b_processed.png&w=3840&q=75)
Transcribed Image Text:eBook
Kahn Inc. has a target capital structure of 60% common equity and 40% debt to fund its $12 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 12%, a before-tax cost of debt of 12%, 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 (D;) is $2, and the current stock price is $29.
a. What is the company's expected growth rate? Do not round intermediate calculations. Round your answer to two decimal places.
%
b. If the firm's net income is expected to be $1.8 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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