While computing the average cost of capital of the firm, the cost of which of the following sources of…
While computing the Weighted Average Cost of Capital (WACC), the cost of retained earnings (Kr) represents the opportunity cost of dividends foregone by equity shareholders…
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While computing the average cost of capital of the firm, the cost of which of the following sources of funds is considered almost equal to the cost of equity ?
Answer and explanation
Correct answer B
While computing the Weighted Average Cost of Capital (WACC), the cost of retained earnings (Kr) represents the opportunity cost of dividends foregone by equity shareholders and is therefore considered equal (or nearly equal, adjusted only for flotation costs and personal taxes) to the cost of equity capital (Ke).
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UGC NET Management