Which of the following statements about the cost of capital ismost correct?

Equity generated by retained earnings is costless.

For-profit firms should always retain the full amount of net income and reinvest it in the business.

For-profit firms should always distribute the full amount of net income as dividends.

For-profit firms should distribute net income through dividends if they cannot earn as much as stockholders could in similar risk investments.

None of the statements above is correct.