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TeachMeFinance.com - explain Cost of retained earnings Cost of retained earnings The residual of an entity's earnings over expenditures, including taxes and dividends, that are reinvested in its business. The cost of these funds is always lower than the cost of new equity capital, due to taxes and transactions costs. Therefore, the cost of retained earnings is the yield that retained earnings accrue upon reinvestment. About the author Mark McCracken Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English". Copyright © 2005 by Mark McCracken, All Rights Reserved. TeachMeFinance.com is an informational website, and should not be used as a substitute for professional medical, legal or financial advice. Information presented at TeachMeFinance.com is provided on an "AS-IS" basis. Please read the disclaimer for details.