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Cost of Retained Earnings

Cost of Retained Earnings:

Retained earnings is one of the sources of finance for investment proposal; it is different from other sources like debt, equity and preference shares. Cost of retained earnings is the same as the cost of an equivalent fully subscripted issue of additional shares, which is measured by the cost of equity capital. Cost of retained earnings can be calculated with the help of the following formula:

Ke = Kt (1–t) (1–b)

finance
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Where,

Kr = Cost of retained earnings

Ke = Cost of equity

t = Tax rate

b = Brokerage cost

Cost of Retained Earnings Cost of Retained Earnings Reviewed by Ikpokolo Francis on Saturday, May 06, 2017 Rating: 5

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