Why Is External Common Equity Capital More Expensive Then Internal

question 1

Multiple Choice

Why is external common equity capital more expensive then internal common equity capital?

• A)Actually, external equity is not more expensive than internal, they both have the same cost.
• B)Because the capital asset pricing model is used to estimate the cost of internal and the dividend valuation model is used to estimate cost of external.
• C)Because internal is free, it has no cost since there is no need to attract investors to raise internal equity.
• D)Because the cost of external must take into account flotation costs, internal does not.

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Definitions:

Companionship

The feeling of fellowship or friendship, the presence of another individual offers support, camaraderie, or comfort.

Similarity In Backgrounds

The degree to which individuals share common experiences, cultures, education, or family histories, contributing to a sense of connection or understanding.

Partner

An individual with whom one shares a significant relationship, often in a personal, business, or collaborative context.

Romantic Loneliness

A feeling of sadness or emptiness caused by a lack of romantic relationships or emotional intimacy with others.