标题: Cost of Capital of Retained Earnings [打印本页] 作者: Beatnik 时间: 2011-7-27 14:17 标题: Cost of Capital of Retained Earnings
Guys, can somebody explain why cost of capital of retained earnings is considered same as cost of capital of equity. I didn't understand the reason behind it.
Thank you作者: Viceroy 时间: 2011-7-27 14:17
This might be a simplistic response but RE are part of the internal equity accounts.作者: ayaz_mahmud369 时间: 2011-7-27 14:18
I believe it has to do with the opportunity cost. Retained earnings should grow the firm. If the company can't utilize those retained earnings in such a way that is superior than what its shareholders would earn if it paid it out in dividends and allowed to invest those dividends in a different company, then the company isn't maximizing their value.作者: DSquaredSlim 时间: 2011-7-27 14:18
ATH Wrote:
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> This might be a simplistic response but RE are
> part of the internal equity accounts.
That's exactly it.
(If RE _isn't_ equity, then what is?)作者: transferpricing 时间: 2011-7-27 14:18
