The cost of common stock is the rate of return the marginal shareholder requires on the firm's common stock.

Question

Quizplus · Accepted Answer

The cost of common stock is also known as the cost of equity and it represents the rate of return that the marginal shareholder demands in order to invest in the firm's common stock. This cost can be calculated using various methods, such as the dividend discount model or the capital asset pricing model.

The Cost of Common Stock Is the Rate of Return