RSES

The Paulson Company's year$-$end balance sheet is shown below. Its cost of common equity is long$-$term debt sells at par value. The firm's total debt, which is the sum of the company's short$-$term debt and long$-$term debt, equals $$1,172.$ The firm has $576$ shares of common stock outstanding that sell for $$4\mathrm{.}00$ per share.

$\backslash$table$[[$Assets$,$Liabilities And Equity$],[$Cash$,$$$120,$Accounts payable and accruals,$$10$

Problem $10\mathrm{.}15($WACC and Cost of Common Equity$)$

Kahn Inc. has a target capital structure of $65\%$ common equity and $35\%$ debt to fund its $$12$ billion in operating assets. Furthermore, Kahn Inc. has a WACC of $13\%,$ a before$-$tax cost of debt of $12\%,$ and a tax rate of $25\%.$ The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year $(D_1)$ is $$2,$ and the current stock price is $$26.$

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 $$1\mathrm{.}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 Payout ratio