Q24
Cost of retained earnings is equal to _______.
A.
Cost of equity
AnswerB.
Cost of debt
C.
Cost of bank loan
D.
Cost of term loans
Answer: Option A
Solution
Answer: Option A
Solution:
Cost of retained earnings is equal to Cost of equity. The cost of retained earnings is the earnings foregone by the shareholders. In other words, the opportunity cost of retained earnings may be taken as the cost of retained earnings.