Since Retained Earnings Are Viewed as a Fully Subscribed Issue

question 6

Multiple Choice

Since retained earnings are viewed as a fully subscribed issue of additional common stock, the cost of retained earnings is ________.

• A) less than the cost of new common stock equity
• B) equal to the cost of new common stock equity
• C) greater than the cost of new common stock equity
• D) not related to the cost of new common stock equity

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Definitions:

Economic Benefits

Benefits that can be quantified in monetary terms and usually include profits, revenues, and savings.

Future Cash Inflows

Expected receipts of cash in the future from investments, operations, or financing activities.

Asset's Value

The worth of an asset, calculated based on factors such as market value or depreciation.