Suppose Congress Has Just Passed a New Initiative That Would

question 28

Multiple Choice

Suppose Congress has just passed a new initiative that would provide before and after school programs to students in lower income neighborhoods and districts that consistently score lower on standardized tests. In order to fund this, the federal government has decided to provide ______.

• A) block grants
• B) grants-in-aid
• C) private tax dollars
• D) school supplies

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Definitions:

Debt/Equity Ratio

The financial ratio that illustrates the use of shareholders' equity versus debt in funding company assets.

M&M Proposition II

A firm’s cost of equity capital is a positive linear function of its capital structure.

Cost of Capital

The cost of funds used for financing a business, typically considered as the weighted average of the costs of equity and debt financing.