Why is the cost of retained earnings cheaper than the cost of issuing new

Why is the cost of retained earnings cheaper than the

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1.Why is the cost of retained earnings cheaper than the cost of issuing new common stock? a)When a company issues new common stock they also have to pay flotation costs to the underwriter. b)Issuing new common stock may send a negative signal to the capital markets, which may depress the stock price. 2.Example: Floatation cost a)Q: If issuing new common stock incurs a flotation cost of 15% of the proceeds, what is re ? 3.More on Flotation costs
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