Alfamedics Lts received Rs 10 crores as equity through a new issue of equity shares. The company is going to use the proceeds from equity shares and its retained earnings worth 5 crores for the expansion purpose of one of the project. The equity shareholders expects a desired return of 14%. The cost of bringing the equity issue is 2%.

Define these terms and discuss how the cost of external equity and cost of retained earnings differs from cost of debt. Compute these costs and provide suitable reasons for the answers