Answered

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The firm's cost of external equity raised by issuing new stock is the same as the required rate of return on the firm's outstanding common stock.

a. true
b. false

Sagot :

The firm's cost of external equity raised by issuing new stock is the same as the required rate of return on the firm's outstanding common stock.

This statement is false.

Cost of equity is the rate of return paid  out by company  to equity investors. A firm uses cost of equity to assess the relative attractiveness of investments which  includes  both internal projects as well as  external acquisition opportunities.

Companies mostly use a combination of equity and debt financing, with equity capital being more expensive.

The cost of equity can be calculated by using  either the CAPM  known to as Capital Asset Pricing Model or Dividend Capitalization Model  used for companies that pay out dividends.

To know more about cost of equity here:

https://brainly.com/question/14041475

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