The Cost of Retained Earnings to the Firm Is the Same

question 120

True/False

The cost of retained earnings to the firm is the same as the cost of an equivalent fully subscribed issue of additional common stock.

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Definitions:

Investment

The allocation of resources, usually financial, in expectation of generating an income or profit.

Portfolio Expected Return

The weighted average of the expected returns of the assets in an investment portfolio.

Equal Investment

A strategy where equal amounts of capital are allocated to each investment within a portfolio.

Stocks

Shares of ownership in a company that represent a claim on part of the company's earnings and assets.