1) The cost of retained earnings is Select one: a. zero. b. equal to the cost of

ID: 2634373 • Letter: 1

Question

1) The cost of retained earnings is

Select one:

a. zero.

b. equal to the cost of a new issuance of common stock.

c. equal to the cost of common stock equity.

d. irrelevant to the investment/financing decision.

2)The cost of new common stock financing is higher than the cost of retained earnings due to

Select one:

a. flotation cost and commission costs.

b. commission costs and overpricing.

c. flotation costs and underpricing.

d. flotation costs and overpricing.

3) Generally, the order of cost, from the least expensive to the most expensive, for long-term capital of a corporation is

Select one:

a. long-term debt, preferred stock, retained earnings, new common stock.

b. new common stock, retained earnings, preferred stock, long-term debt.

c. preferred stock, retained earnings, common stock, new common stock.

d. common stock, preferred stock, long-term debt, short-term debt.

1b. equal to the cost of a new issuance of common stock.

2 c. flotation costs and underpricing.

3long-term debt, preferred stock, retained earnings, new common stock

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