Since retained earnings are viewed as a fully subscribed issue of additional common stock, the cost of retained earnings is
A) greater than the cost of new common stock equity.
B) less than the cost of new common stock equity.
C) not related to the cost of new common stock equity.
D) equal to the cost of new common stock equity.

Question

Quizplus · Accepted Answer

Retained earnings are considered less costly than new common stock equity because they do not involve flotation costs or the issuance of new shares, which can dilute existing ownership.

Since Retained Earnings Are Viewed as a Fully Subscribed Issue