The cost of equity capital from the sale of ordinary shares (ke) is generally equal to the cost of equity capital from retention of earnings (rs), divided by one minus the flotation cost as a percentage of sales price (1 - F).

Question

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The cost of equity capital from the sale of ordinary shares (ke) is generally higher than the cost of equity capital from retention of earnings (rs), and the relationship between the two is not directly affected by the flotation cost.

The Cost of Equity Capital from the Sale of Ordinary