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.

---

Definitions:

Psychosexual Development

A Freudian concept that describes how personality develops through stages centered on the sexual pleasure of different parts of the body.

Toilet Training

The process of teaching a young child to use the toilet for urination and defecation.

Fixation

An obsessive interest or feeling that may impede the development of more normal interests and social interactions.

Psychic Energy

A concept in psychoanalytic theory referring to the force, derived from instinctual biological drives, that motivates human behavior and mental activities.