Kahn Inc. has a target capital structure of 45% common equity and 55% debt to fund its $11 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 14%, a before-tax cost of debt of 10%, 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 $4, and the current stock price is $32.
What is the company's expected growth rate? Do not round intermediate calculations. Round your answer to two decimal places.
%
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? Do not round intermediate calculations. Round your answer to two decimal places. (Hint: Refer to Equation below.)
Growth rate = (1 - Payout ratio)ROE
% (*THE ANSWER IS NOT 56.96*)
1.
cost of equity=(14%-10%*(1-25%)*55%)/45%=21.94444%
growth rate=21.94444%-4/32=9.44444%
2.
RoE=1.1/45%*11
payout rate=1-9.4444444%/(1.1/(45%*11))=57.50000%
Kahn Inc. has a target capital structure of 45% common equity and 55% debt to fund...
Kahn Inc. has a target capital structure of 45% common equity and 55% debt to fund its $11 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 14%, a before-tax cost of debt of 10%, 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 $4, and the current stock price is $32. What is the company's expected growth...
Kahn Inc. has a target capital structure of 45% common equity and 55% debt to fund its $11 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 14%, a before-tax cost of debt of 11%, 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 $33. What is the company's expected growth...
Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 16%, a before-tax cost of debt of 11%, 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 $4, and the current stock price is $34. What is the company's expected growth...
Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund its $11 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 15%, a before-tax cost of debt of 8%, 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 $4, and the current stock price is $34. a. What is the company's expected...
Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund its $12 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 14%, a before-tax cost of debt of 12%, 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 $32. a. What is the company's expected...
Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund its $8 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 14%, a before-tax cost of debt of 8%, 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 $2, and the current stock price is $31. a. What is the company's expected...
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 13%, a before-tax cost of debt of 12%, 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 $33. a. What is the company's expected...
Kahn Inc. has a target capital structure of 40% common equity and 60% debt to fund its $9 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 13%, a before-tax cost of debt of 8%, 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 $4, and the current stock price is $30. a. What is the company's expected...
Kahn Inc. has a target capital structure of 50% common equity and 50% debt to fund its $8 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 12%, a before-tax cost of debt of 8%, 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 $2, and the current stock price is $28. What is the company's expected growth...
Kahn Inc. has a target capital structure of 70% common equity and 30% debt to fund its $9 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 15%, a before-tax cost of debt of 8%, 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 $35. What is the company's expected growth...