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The Financial Analyst at GoodBuys Reasoned That Since the Costs

question 84

Essay

The financial analyst at GoodBuys reasoned that since the costs of flotation amount to about 15% of the proceeds for small common stock issues, the opportunity cost of external equity capital is about 15 percentage points higher than that of retained earnings. Comment on his reasoning.


Definitions:

Endocrine System

A network of glands in the body that produce and release hormones directly into the blood to regulate the body's growth, metabolism, and sexual development and function.

Sympathetic Nervous System

A component of the autonomic nervous system that activates the body's fight or flight response in preparation for action.

B Lymphocytes

A type of white blood cell that plays a critical role in the immune system by producing antibodies to fight infections.

Bacterial Infection

An infection caused by bacteria entering the body, multiplying, and causing a reaction in the body.

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