Factor by Grouping

question 131

Essay

Factor by grouping.

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Definitions:

Cost of Retained Earnings

The rate of return that shareholders expect on the earnings that a company keeps and reinvests in its operations.

Risk Premium

The extra return expected by an investor for holding a risky asset rather than a risk-free asset.

Flotation Costs

The costs incurred by a company in issuing new securities, including underwriting, legal, and registration fees.

Equity Capital

Funds raised by a company in exchange for shares of ownership in the company.