Problem: Kahn Inc. has a target capital structure of 60 percent common equity and 40 percent debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 13 percent, a before tax debt of 10 percent, and a tax rate of 40 percent. The company'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.
Q1. What is the company's expected growth rate?
Q2. If the firm's net income is expected to be $1.1 billion, what portion of its net income is the firm expected to pay out as dividends?