20. Neptune Corporation has a capital structure of 40% debt and 60% common equity. This capital structure is expected not to change. The firm's tax rate is 21%. The firm can issue the following securities to finance capital investments:

Debt: Capital can be raised through bank loans at a pretax cost of 9.2%. Also, bonds can be issued at a pretax cost of 7.0%.

9. Neptune has just announced a 50% stock dividend. Which of the following statements is correct?

Group of answer choices

The price of each share decreases and the number of shares outstanding rises with the firms market capitalization unchanged

The stock price does not change because the firms value is not affected by the stock dividends

The price of each share increases as this dividend increases the firms market capitalization

The stock price increases because this stock dividend improves the investors expectations concerning their future cash flows

Common Stock: Retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $90. Flotation costs will be $2 per share. The recent common stock dividend was $5.79. Dividends are expected to grow at 7% in the future.

What is the firm's cost of external equity?

SET YOUR CALCULATOR TO 4 DECIMAL PLACES AND ROUND TO 2 DECIMAL PLACES AT THE END. DO NOT ENTER THE % SIGN. IF YOUR ANSWER IS 7.7011%, FOR EXAMPLE, ENTER 7.70.