A firm's cost of ____ reflects an opportunity cost: what the existing shareholders could have earned if they had received the earnings as dividends and invested the funds themselves.

Question

Quizplus · Accepted Answer

The description matches the concept of retained earnings, which represent the portion of a company's earnings that are kept instead of being distributed as dividends. The cost of retained earnings reflects what shareholders could have earned if they had received the dividends and invested the funds themselves.

A Firm's Cost of ____ Reflects an Opportunity Cost: What