Define Negative Externality, and Explain How Water Pollution Is an Example

question 49

Essay

Define negative externality, and explain how water pollution is an example.

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Definitions:

Debt-equity Ratio

This ratio compares a company's total liabilities to its shareholder equity, indicating the relative proportion of shareholder equity and debt used to finance a company's assets.

Pre-tax Cost

This is the cost of an investment or financial activity before the application of taxes.

Cost of Equity

The return that investors expect for investing in a company's equity, often estimated using models like the Capital Asset Pricing Model (CAPM).

Weighted Average Cost

The combined cost of both variable and fixed goods, services, or sources of finance, weighted according to their proportions.