Since retained earnings are generated by the firm:
a. there is no component cost for these funds.
b. the funds have a positive cost that is more than new equity issues.
c. the funds have a positive cost that is less than new equity issues.

The correct option is C,the funds have a positive cost that is less than new equity issues.

Explanation:

Retained earnings have costs attached to it because the common stockholders expect that the company would use its retained earnings effectively such that is able to pay dividends at  year or in such a way that the company's stock share price appreciates(capital gains yield)

However, the cost of retained earnings is lower when compared with new equity issues since the new issue would require issue costs such as regulatory fees as well as underwriter's commission.

answer; balance sheets;