Give Two Reasons Why an Investor May NOT Be Able

question 6

Essay

Give two reasons why an investor may NOT be able to undo a corporation's capital structure to achieve their desired level of leverage.

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Definitions:

Diseconomies of Scale

A condition where a firm experiences increasing production costs and decreasing returns as it becomes too large.

Production Function

An economic model that describes the relationship between inputs used in production and the output of goods or services.

Marginal Cost

The extra expense associated with manufacturing an additional unit of a product or service.

Variable Cost

Expenses that fluctuate based on the level of production or the amount of output.