4.1 Suppose a company uses only debt and internal equity to finance its capital budget and uses CAPM to compute its cost of equity. Company estimates that its WACC is 12%. The capital structure is 75% debt and 25% internal equity. Before tax cost of debt is 12.5% and tax rate is 20%. Risk free rate is rRF=6% and market risk premium ( rmrRF)=8% : What is the beta of the company? (5). 4.2 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 P0=$66 per share, and its current dividend of D0=$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) 4.3 Calculate the pre-tax WACC