Ignoring Costs Associated with New Issues, What Is the Cost

question 18

Multiple Choice

Ignoring costs associated with new issues, what is the cost of retained earnings the same as?

• A) The cost of debt, as creditors have first call on retained earnings at the company's termination.
• B) The weighted average cost of all the company's sources of capital as the company is indifferent as to the use of retained earnings or other sources.
• C) The return on total assets as this ratio is equal to the sum of retained earnings plus dividends divided by total assets.
• D) The cost of shares as retained earnings represent the undistributed profits belonging to the common shareholders.
• E) The return on capital employed as retained earnings represents the opportunity cost of investment.