The cost of retained earnings is:
A) the cheapest component cost
B) zero because the firm does not have to pay interest or dividend to itself
C) always less than the cost of new common stock
D) typically cheaper than the cost of preferred stock

Question

Quizplus · Accepted Answer

The cost of retained earnings is typically less than the cost of new common stock because it avoids flotation costs and other expenses associated with issuing new shares.

The Cost of Retained Earnings Is