Empirical Evidence Suggests That

question 133

Multiple Choice

Empirical evidence suggests that:

• A)technological change leads to higher unemployment rates.
• B)the unemployment rate in the U.S.in the late 1990s was lower than that in the 1970s.
• C)the unemployment rate in the U.S.in the late 1990s was higher than that in the 1970s.
• D)changes in the growth rate of population lead to higher unemployment rates.
• E)increase in government regulation leads to higher unemployment rates.

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Definitions:

Target Capital Structure

The optimal mix of debt, equity, and other financing sources that a company aims to achieve to minimize cost of capital and maximize shareholder value.

Optimal Structure

The ideal mix of debt, equity, and internal funds that minimizes the cost of capital while maximizing shareholder value.

IRR

Internal Rate of Return, a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Cost Of Capital

The minimum return that a company must earn on existing asset base to satisfy its creditors, owners, and other providers of capital.