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Cost of retained earnings is equal to _______.
- ACost of equity
- BCost of debt
- CCost of bank loan
- DCost of term loans
Correct answer: A
Discussion 1
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Cost of equity
Cost of retained earnings is equal to Cost of equity. The cost of retained earnings is the earnings foregone by the shareholders. In other words, the opportunity cost of retained earnings may be taken as the cost of retained earnings.
Cost of retained earnings is equal to Cost of equity. The cost of retained earnings is the earnings foregone by the shareholders. In other words, the opportunity cost of retained earnings may be taken as the cost of retained earnings.