Internal financing is more costly than external financing because of issuance costs.

Name: Internal financing is more costly than external financing because of issuance costs.
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Question

Quizplus · Accepted Answer

Internal financing (such as using retained earnings) does not have issuance costs associated with it, whereas external financing (such as issuing stocks or bonds) requires fees for underwriting, legal, and other associated costs. Therefore, external financing is typically more costly than internal financing.

Internal Financing Is More Costly Than External Financing Because of Issuance