Cost of retained earnings

What is Cost of retained earnings?

Cost of retained earnings meaning The residual of an entity’s earnings over expenditures, including taxes and dividends, that are reinvested in its business. The cost of these funds is always lower than the cost of new equity capital, due to taxes and transactions costs. Therefore, the cost of retained earnings is the yield that retained earnings accrue upon reinvestment.

 

reference: Glossary – U.S. Energy Information Administration (EIA)

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