Some authors do not consider it necessary to calculate separately cost of retained
earnings. They say that the cost of retained earnings is included in the cost of equity share
capital. They say that the existing share price is used to determine cost of equity capital
and this price includes the impact of dividends and retained earnings. There are
authorities who also suggest that cost of retained earnings is to be determined separately.
Two alternative approaches are there :
i) One is to regard cost of equity capital as the cost of retained earnings.
ii) The concept of external yields as suggested by Ezra Soloman. It assures investment of retained earnings in another firm. Symbolically
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