The cost of common stock equity capital represents the return required by existing shareholders on their investment in order to leave the market price of the firm's outstanding share unchanged.

Question

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The statement is true. The cost of common stock equity capital, also known as the cost of equity, is the return that shareholders require on their investment in order to maintain the current market value of the firm's shares. This is often estimated using the capital asset pricing model (CAPM) or other similar models.

The Cost of Common Stock Equity Capital Represents the Return