The Reason Why Reinvested Earnings Have a Cost Equal to R_s

question 28

True/False

The reason why reinvested earnings have a cost equal to r_s is because investors think they can (i.e., expect to) earn r_s on investments with the same risk as the firm's common stock, and if the firm does not think that it can earn r_s on the earnings that it retains, it should distribute those earnings to its investors.Thus, the cost of reinvested earnings is based on the opportunity cost principle.

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Definitions:

Empathetic Approach

A method or strategy that involves understanding and sharing the feelings of another individual.

Client-centered

A psychotherapeutic approach developed by Carl Rogers that emphasizes providing a supportive environment in which clients can improve their self-concept and increase their understanding of their own behaviors.

Eating Disorders

Mental disorders characterized by abnormal or disturbed eating habits that negatively affect a person's health and well-being, such as anorexia nervosa or bulimia nervosa.

Client-centered Therapist

A therapist who practices client-centered therapy, focusing on the individual's ability to self-heal and achieve self-realization through a non-judgmental, empathetic therapeutic relationship.