Which of the following is considered the least expensive source of capital?

Long-term debt is considered the least expensive source of capital primarily due to the advantage of tax deductibility associated with interest payments. When a company issues long-term debt, it typically pays interest on the borrowed amount, which can be deducted from taxable income. This feature effectively lowers the overall cost of borrowing.

In contrast, other forms of capital such as common stock and preferred stock do not provide similar tax benefits. Common stock may involve higher costs, as investors often expect a higher return due to the greater risk they undertake, given their position after debt holders in the event of liquidation. Preferred stock, while sometimes having fixed dividends, still does not offer the same tax advantages that long-term debt does.

Retained earnings are also less expensive than common or preferred stock but are not always viewed as "capital" in the same way as debt or equity; they represent reinvested profits rather than funds raised externally.

Thus, considering the associated costs and the benefits of tax deductions, long-term debt stands out as a more cost-effective financing option for organizations looking to raise capital.