$4\mathrm{.}2$ A company finances its operations with $50$ percent debt and $50$ percent equity. Its net income

is I $=$ $$30$ million and it has a dividend payout ratio of x $=20\%.$ Its capital budget is B $=$ $$40$

million this year. The interest rate on company$$s debt is rd $=10\%$ and the company$$s taxr ate

is T $=40\%.$ The company$$s common stock trades at P$0=$ $$66$ per share, and its current dividend

of D$0=$ $$4$ per share is expected to grow at a constant rate of g $=10\%$ a year. The flotation

cost of external equity, if issued, is F $=5\%$ of the dollar amount issued.

a$)$ Will the company have to issue external equity? $(5)$

b$)$ What is the company$$s WACC? $(5)$

$4\mathrm{.}3$ Calculate the pre$-$tax WACC. $(5)$