The Long-Run Phillips Curve Indicates That the Consequences of Trying

question 31

Multiple Choice

The long-run Phillips curve indicates that the consequences of trying to reduce unemployment below its natural rate would be:

• A)an ever-rising rate of unemployment.
• B)an inflation rate equal to zero.
• C)a very high uncontrollable rate of inflation.
• D)a very low rate of inflation.
• E)a natural rate of unemployment equal to zero.

Analyze how capital structure affects a firm’s cost of capital.

Comprehend the effect of taxes on cost of capital components.

Understand the relevance of target and existing capital structure in raising capital.

Learn the significance of economic value added (EVA) in financial decision making.

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Definitions:

Operating Cash Flow

The cash generated from a company's normal business operations, indicating whether a company can maintain or grow its operations.

Required Rate

The minimum annual percentage return that an investment must earn to be considered acceptable to an investor, also known as the required rate of return.

Marginal Tax Rate

The percentage of tax applied to your income for each tax bracket in which you qualify, essentially the rate at which the last dollar of income is taxed.

Depreciation

The allocation of the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.