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WACC AND COST OF COMMON EQUITY Kahn Inc. has a target capital structure of 60% common...

WACC AND COST OF COMMON EQUITY

Kahn Inc. has a target capital structure of 60% common equity and 40% debt to fund its $9 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 12%, a before-tax cost of debt of 10%, 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 $29.

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

  3. 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? (Hint: Refer to Equation below.)

    Growth rate = (1 - Payout ratio)ROE

    Round your answer to two decimal places at the end of the calculations. Do not round your intermediate calculations.
    %

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jeff jeffy answered 8 months ago
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