The Cost of Equity Capital in the Form of New

question 10

Multiple Choice

The cost of equity capital in the form of new common stock will be higher than the cost of retained earnings because of

• A) the existence of taxes.
• B) the existence of flotation costs.
• C) investors' unwillingness to purchase additional shares of common stock.
• D) the existence of financial leverage.

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Definitions:

Dependent Variable

In research, it's the outcome variable that is influenced by the independent variable.

Interaction Effect

Occurs when the effect of one independent variable on the dependent variable varies depending on the level of another independent variable.

Main Effect

In an experimental design, the direct impact of an independent variable on a dependent variable, disregarding the effects of other variables.

Simple Effect

The effect of one independent variable at a particular level of another independent variable in the context of more complex experimental designs.