10. Problem 10.15 (WACC and Cost of Common Equity) BA eBook Kahn Inc. has a target capital structure of 45% common equit

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10 Problem 10 15 Wacc And Cost Of Common Equity Ba Ebook Kahn Inc Has A Target Capital Structure Of 45 Common Equit 1 (32.63 KiB) Viewed 9 times

10. Problem 10.15 (WACC and Cost of Common Equity) BA eBook Kahn Inc. has a target capital structure of 45% common equity and 55% debt to fund its $12 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 14%, a before-tax cost of debt of 9%, 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 (D₁) is $3, and the current stock price is $30. 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 $2.0 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 %