The Cost of External Equity Capital Raised by Issuing New

question 44

True/False

The cost of external equity capital raised by issuing new common stock (re) is defined as follows, in words: "The cost of external equity equals the cost of equity capital from retaining earnings (rs), divided by one minus the percentage flotation cost required to sell the new stock, (1 - F)."

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Definitions:

Restitution

The act of compensating for loss, damage, or injury; in legal contexts, it often refers to returning the victim to their original position before the harm occurred.

Quasi Contract

A legal concept where a court enforces an obligation between two parties who have not agreed to an actual contract, to prevent one party from being unjustly enriched.

Oral Contracts

Agreements between parties that are made verbally and not memorialized in writing, yet are still legally binding in many cases.

Reformation

A court-ordered correction of a written contract so that it reflects the true intentions of the parties.