In General,it Is Not Possible for R_e,the Cost of New

question 101

True/False

In general,it is not possible for r_e,the cost of new equity,to be lower than r_s,the cost of retained earnings.However,an exception to this rule occurs when the stock price increases just prior to the firm issuing new equity such that it more than offsets the flotation costs and thus,r_e becomes less than r_s.

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Definitions:

Primary Management

The core activities and responsibilities of managers that are fundamental to the successful operation of an organization.

Automobile Company

A business entity that specializes in manufacturing and selling vehicles.