Q431
Type of cost which is used to raise common equity by reinvesting internal earnings is classified as
A.
cost of mortgage
B.
cost of common equity
AnswerC.
cost of stocks
D.
cost of reserve assets
Answer: Option B
Solution
Answer: Option B
Solution:
Type of cost which is used to raise common equity by reinvesting internal earnings is classified as cost of common equity. The cost of equity refers to two separate concepts depending on the party involved. If you are the investor, the cost of equity is the rate of return required on an investment in equity.