In: Finance
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 13%, a before-tax cost of debt
of 9%, 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 $24.
- 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.
%
- If the firm's net income is expected to be $1.6 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.
.