WACC and cost of common equity
Kahn Inc. has a target capital structure of 60% common equity and 40% debt to fund its $10 billion in operating assets. Further-more, Kahn Inc. has a WACC of 13%, a before-tax cost of debt of 105, 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 $3 and the current stock price is $35.
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?