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Kahn Inc.

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.

a. What is the company's expected growth rate?
b. 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?

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WACC and cost of common equity
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 ...

Solution Summary

This solution is comprised of a detailed explanation to answer what is the company's expected growth rate and what portion of its net income is the firm expected to pay out as dividends

$2.19