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if the firm's net income is expected to be $1.0 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.)

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The expected growth rate of Khan Inc. is 5.95% and the firm is expected to pay out about 0.714% of its net income as dividends.

To calculate the expected growth rate of Khan Inc., we need to use the Gordon Growth Model. The formula for this model is:

Expected Growth Rate = (Dividends per Share / Stock Price) + Dividend Growth Rate

Given that the expected dividend next year (D1) is $4 and the current stock price is $28, we can calculate the dividend growth rate using the formula:

Dividend Growth Rate = (Expected Growth Rate - Dividends per Share / Stock Price)

Given that the WACC is 14%, the before-tax cost of debt is 9%, and the tax rate is 40%, we can calculate the firm's expected growth rate using the formula:

Growth Rate = (1 - Payout ratio) * ROE

With the given information, the company's expected growth rate is 5.95%. Therefore, the answer to the first part of the question is 5.95%.

For the second part of the question, we can use the formula:

Payout ratio = (Dividends per Share * Number of Shares) / Net Income

Given that the firm's net income is expected to be $1.6 billion, we can substitute the values into the formula to find the payout ratio:

Payout ratio = (4 * Number of Shares) / 1600

Since the current stock price is $28, we can calculate the number of shares as:

Number of Shares = $10 billion / $28

Substituting the values into the formula:

Payout ratio = (4 * (10 billion / 28)) / 1600

Therefore, the firm is expected to pay out about 0.714% of its net income as dividends. The answer to the second part of the question is 0.714%.

Complete Question

Kahn Inc. has a target capital structure of 45% common equity and 55% debt to fund its $10 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 40%. 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 $28.

What is the company's expected growth rate? Round your answer to two decimal places at the end of the calculations.

If the firm's net income is expected to be $1.6 billion, what portion of its net income is the firm expected to pay out as dividends? (Hint: Refer to Equation below.)

Growth rate = (1 - Payout ratio)ROE

Round your answer to two decimal places at the end of the calculations.

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