For small issues of common stock, the issue costs to about 10 percent of the proceeds. This

Question:

“For small issues of common stock, the issue costs to about 10 percent of the proceeds. This means that the opportunity cost of external equity capital is about 10 percentage points higher than that of retained earnings.” Does the speaker have a point?

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...