. Kahn Inc. has a target capital structure of 60 percent equity and 40 percent debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a weighted average cost of capital (WACC) of 13 percent, its before-tax cost of debt is 10 percent, and its tax rate is 40 percent. The companys retained earnings are adequate to fund the common equity portion of the capital budget. The firms expected dividend next year (D1) is $3 and the current stock price is $35.

a. What is the companys expected growth rate?

b. If the firms net income is expected to be $1.1 billion, what portion of its net income is the firm expected to pay out as dividends?