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Retained earnings represents the earnings accumulated by the firm over its life.​

Because interest is a tax-deductible expense, the effective cost of debt is less than the stated rate of interest.

An increase in investors’ required return decreases an investment’s internal rate of return.​

The retention of earnings instead of paying dividends

If a firm uses accelerated depreciation, its earnings are initially increased.​

If interest rates are 9 percent, an annuity of $100 for 10 years is to be preferred to $1,000 after 10 years.​

A stock dividend

If a person owes $50,000 at 10 percent and annually pays $10,000, the loan will be retired in 5 years.​

A stock dividend

Many bonds have a call feature, which permits the firm to retire the bonds prior to maturity.​