3. Is the size of the capital budget limited by the amount of net income, as Don implies? What is the maximum size that the capital budget can be in 2006 without selling assets or seeking outside financing? 4. a. Don says the cost of the outside financing is more expensive than the cost of internal financing, due to the flotation costs charged by investment bankers. Given the data you have, what would you say is the firm's cost of internal equity financing? b. Assume Montgomery can sell bonds priced to yield 13 percent. What is the firm's aftertax cost of debt? (The tax rate is 25 percent.) c. Given the cost of debt and the cost of internal equity financing, why doesn't Montgomery just borrow the total amount needed to fund the capital budget and the dividend as well