Cost of retained earnings and external equity, Financial Management

Assignment Help:

Expalin the basic concept of financial management and Cost of Retained Earnings and External Equity???

Also explain the hoe can ew calculate the external equity?

Help me

 


Related Discussions:- Cost of retained earnings and external equity

Determine the working capital in the firm, a) Year 2 Current Ratio = 700 / ...

a) Year 2 Current Ratio = 700 / 300 = 2.33 : 1 Year 1 Current Ratio = 500 / 200 = 2.5 : 1 Year 2 Acid Test = (700 - 350) / 300 = 1.17 : 1 Year 1 Acid Test = (500 - 250) / 200 =

Rationale of accounting standards, Rationale of Accounting Standards A...

Rationale of Accounting Standards Accounting Standards are created along with a view to harmonise various accounting policies and practices in use inside a country. The goal o

Considerations before a mbo, Considerations before a MBO An MBO is just...

Considerations before a MBO An MBO is just like any other take over and same consideration must be applied. (i)  Potential of the business. Is it worth buying? What does the

Engagement completion document, Engagement Completion Document - A document...

Engagement Completion Document - A document whereby AUDITOR identifies all significant findings or issues. Document must be as specific as essential in the circumstances for a revi

Computing forward rate, We can compute any forward rate using the spo...

We can compute any forward rate using the spot rate. When we tell 3 years forward rate 4 years from now, there are two elements to consider. One is the length of

Calculate the percentage of price change and regular bonds, Flying High Inc...

Flying High Inc. plans to raise $5,000,000 external financing through issuing bonds, and is considering two options: regular bonds and zero couple bonds.  The regular bonds will ha

What are factors influenced the shape of the yield curve, What are number o...

What are number of factors that influence the shape of the yield curve? There are some of factors which influence the shape of the yield curve as follows: (1) Expectations

Investment banker, The Role of Merchant Banker The issuer appoints the ...

The Role of Merchant Banker The issuer appoints the Merchant Banker (or Investment Banker) to undertake the issue activity. A Merchant Banker performs multiple functions during

Stock exchange, Working and function of stock exchange

Working and function of stock exchange

Calculate average amount of working capital required, X & Y is desirous to ...

X & Y is desirous to purchase a business and has consulted you, and one point on which you are asked to advice them, is the average amount of working capital which will be required

Bella

2/14/2013 12:05:49 AM

It is usefull for you.

Cost of Retained Earnings and External Equity:

Equity finance may be calculated in two ways. Firstly by using Retained Earnings and then by issue of additional equity. The cost of equity or the return given by equity shareholders is the same in both cases. Irrespective of whether a firm raises equity finance either by retained additional equity or earnings, the cost of equity is the similar. The only dissimilarity is in floatation costs. There are no floatation costs for earnings whereas there is a floatation cost of 2 to 10% or sometimes even more for additional equity.

The companies do not usually distribute the entire profits earned by them by way of dividend among their shareholders. Some profits are retained by them for future expansion of the market. The cost of retained earnings is the earnings gain by the shareholders. In other words, the opportunity cost of retained earnings can be taken as the cost of retained earnings. It is same as the income that the shareholders would have otherwise earned by placing this money in alternative investments.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd