Since Retained Earnings Is a More Expensive Source of Financing

question 100

True/False

Since retained earnings is a more expensive source of financing than debt and preferred stock, the weighted average cost of capital will fall once retained earnings have been exhausted.

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Definitions:

Total Variable Cost

The total of all variable expenses which change with the level of output.

Economic Consultant

A professional who provides expert advice on economic matters, including analysis, forecasting, and policy recommendations.

Marginal Cost

Marginal Cost is the cost of producing one additional unit of a good.

Average Variable Cost

The cost of labor and materials divided by the total output, representing the variable costs per unit of output.