Possible Sources of Economies of Scale (Size)within a Production Plant

question 9

Multiple Choice

Possible sources of economies of scale (size) within a production plant include:

• A) specialization in the use of capital and labor
• B) imperfections in the labor market
• C) transportation costs
• D) a and b
• E) a and c

---

Definitions:

Intrinsic Value

The perceived or calculated true value of an asset, based on fundamental analysis, irrespective of its current market price.

Mispriced Stock

A stock that is selling for a price which does not accurately reflect its intrinsic value, either undervalued or overvalued.

FCFE Valuation Model

A method used to estimate the value of a company by discounting its expected free cash flows to equity holders at an appropriate risk-adjusted rate.

Discount Rate

The discount rate is the interest rate used to determine the present value of future cash flows in discounted cash flow analysis, reflecting the cost of capital or risk of the cash flows.