In a Democracy, the Idea of the Consent of the Governed

question 53

Multiple Choice

In a democracy, the idea of the consent of the governed argues that government power

• A) derives from the people's consent.
• B) derives from its inherent right to promote law and order.
• C) is justified and necessary.
• D) derives from its security apparatus, particularly the army and the police force.
• E) is acceptable as long as individual rights are recognized.

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Definitions:

Cost of Equity

The return that investors expect for investing in a company's equity, reflecting the risk compared to risk-free assets.

WACC

Weighted Average Cost of Capital, a calculation used to estimate the average rate of return a company is expected to pay its security holders to finance its assets.

MM Model

Refers to the Modigliani-Miller theorem, which proposes that under certain market conditions and assumptions, the value of a firm is unaffected by its capital structure.

Bankruptcy Risk

The likelihood that a company will be unable to meet its financial obligations and may have to declare bankruptcy.