Cost of Equity Raised by Retaining Earnings Can Be Less

question 46

True/False

cost of equity raised by retaining earnings can be less than, equal to, or greater than the cost of external equity raised by selling new issues of common stock, depending on tax rates, flotation costs, the attitude of investors, and other factors.

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Definitions:

Free-Market Economy

An economic system where prices for goods and services are determined by the open market and consumers, with minimal government intervention.

Standard Deviation

A measure of the dispersion or variation in a set of numerical data, indicating how spread out the values are from the mean.

Standard Error

A statistical term that measures the accuracy with which a sample distribution represents a population using standard deviation.