The Two Sources of Value Created by an LBO Are

question 75

Multiple Choice

The two sources of value created by an LBO are:

• A)the tax benefit of debt and increased sales.
• B)lower tax and interest payments.
• C)lower interest expenses and increased efficiency.
• D)increased efficiency and the interest tax shield.
• E)lower taxes and lower dividends.

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Definitions:

Marginal Cost

The surplus cost attributed to generating one more unit of a product or service.

Production Function

A mathematical representation showing the relationship between input factors and the output of goods or services.

Competitive Markets

Markets characterized by many buyers and sellers, where no single participant has significant influence on price or product offerings.

Fixed Costs

Costs that do not vary with the level of output production, such as rent, salaries, and insurance.