To Address the Budget Shortfall in the 2012-2013 Budget, the Most

question 9

Multiple Choice

To address the budget shortfall in the 2012-2013 budget, the most common tactic used by the legislature was

• A) raising tax rates.
• B) borrowing from the federal government.
• C) spending cuts.
• D) a newly implemented income tax.
• E) a brand-new source of revenue derived from underground fracking.

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Definitions:

Interest Paid

The amount of money paid by a borrower to a lender in exchange for the use of borrowed money.

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.