The cost of retained earnings is equal to the required rate of return on a firm's outstanding common stock.

Question

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The cost of retained earnings is the opportunity cost of reinvesting earnings into the firm instead of paying them out as dividends. This opportunity cost is the required rate of return on the firm's outstanding common stock. Therefore, the cost of retained earnings is equal to the required rate of return on a firm's outstanding common stock.

The Cost of Retained Earnings Is Equal to the Required