If the Expected Dividend Growth Rate Is Zero, Then the Cost

question 60

True/False

If the expected dividend growth rate is zero, then the cost of external equity capital raised by issuing new common stock (re) is equal to 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). If the expected growth rate is not zero, then the cost of external equity must be found using a different formula.

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Definitions:

Phospholipids

A class of lipids forming the major component of all cell membranes, characterized by a hydrophilic head and two hydrophobic tails.

Osmotic Pressure

The pressure required to prevent the flow of a solvent through a semipermeable membrane that separates two solutions with different concentrations.

Solute Concentration

The amount of a substance dissolved in a unit volume of solution.

Selectively Permeable

A property of cellular membranes that allows some substances to pass through while preventing the passage of others.