Which of the following sources of funds has an Implicit Cost of Capital?

Equity Share Capital

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Preference Share Capital

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Debentures

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Retained earnings

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Solution

The correct option is C Retained earnings
Implicit cost is that cost which has already been occurred but it is not shown or reported as a separate expenses. Its an opportunity cost which arises when a company uses internal sources towards a project without any compensation for the utilization of the resource. Retained earnings is an internal source.

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The cost of equity shares is generally more as compared to the cost of raising funds through other sources.

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