Question: Kahn Inc. has a target capital structure of 60 percent common equity and 40 percent debt to fund its $10 billion in operating assets. Further-more, Kahn Inc. has a WACC of 13 percent, a before-tax cost of debt of 105, and a tax rate of 40%. The firm's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $3 and the current stock price is $35.
If the firm's net income is expected to be 1.1 billion dollar, what portion of its net income is the company expected to pay out as dividends?