The out-of-pocket cost of common stock is a good approximation of the cost of common stock equity. The discount rate that equates a future stream of expected dividends to the current price is a good approximation of the cost of common stock. The cost of retained earnings is considered to be equal to the required rate of return on a firm's outstanding common stock. Retained earnings represent an internal source of funds that is raised without the payment of interest or cost to the firm's stockholders. Regardless of the particular source of funds utilized for a project, the required rate of return, or discount rate, will be the weighted average cost of capital. The use of the optimum capital structure minimizes the cost of capital. The out-of-pocket cost of common stock is a good approximation of the cost of common stock equity. The discount rate that equates a future stream of expected dividends to the current price is a good approximation of the cost of common stock. The cost of retained earnings is considered to be equal to the required rate of return on a firm's outstanding common stock. Retained earnings represent an internal source of funds that is raised without the payment of interest or cost to the firm's stockholders. Regardless of the particular source of funds utilized for a project, the required rate of return, or discount rate, will be the weighted average cost of capital. The use of the optimum capital structure minimizes the cost of capital