The firm's cost of external equity raised by issuing new stock is the same as the required rate of return on the firm's outstanding common stock.

Question

Quizplus · Accepted Answer

The cost of external equity raised by issuing new stock is typically higher than the required rate of return on the firm's outstanding common stock due to the additional risk and flotation costs associated with issuing new shares.

The Firm's Cost of External Equity Raised by Issuing New