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A large company has recently increased its dividend payments

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A large company has recently increased its dividend payments [#permalink] New post 02 Jun 2013, 19:41
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41% (02:27) correct 59% (01:17) wrong based on 207 sessions
A large company has recently increased its dividend payments to shareholders. Shareholders had previously been worried about the company's stock price, but are now relieved since increasing dividends generally boosts a company's stock price. However, the shareholders' optimism may be ill-founded since spending money on the payment of dividends often indicates that the company has exhausted more lucrative investments for its cash reserves and that the stock price will likely fall in the longer run.


In the argument above, the two bold-faced portions play which of the following roles?

a) The first is evidence that supports a conclusion; the second is that conclusion

b) The first describes evidence that supports a conclusion; the second gives a reason for questioning that support.

c) The first describes the circumstance that the argument seeks to explain; the second provides evidence in support of the explanation that the argument seeks to establish.

d) The first is a premise that is accepted as true; the second is a conclusion that is contrary to the premise.

e) The first is a premise that is accepted as true; the second seeks to clarify the original premise.
[Reveal] Spoiler: OA
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Re: A large company has recently increased its dividend payments [#permalink] New post 02 Jun 2013, 22:08
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Let's try to understand the structure of the argument:

Premise 1: the company has recently increased its dividend payments - Boldface 1 (BF1)
Intermediate conclusion: Shareholders are now relieved since increasing dividends generally boosts a company's stock price.

Premise 2: spending money on the payment of dividends often indicates that the company has exhausted more lucrative investments for its cash reserves and that the stock price will likely fall in the longer run - Boldface 2 (BF2)
Main Conclusion: The shareholders' optimism may be ill-founded.

Now let's look at the choices.
A: BF2 is not the conclusion that BF1 supports. Incorrect.
C: BF2 is the explanation itself, and not evidence that supports it.
D: BF2 does not contradict the given premise BF1
E: BF1 is the original premise - BF2 is not clarifying the premise itself. It is trying to explain why a conclusion made based on BF1 is possibly incorrect.

This leaves us with the right answer B.
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Re: A large company has recently increased its dividend payments [#permalink] New post 24 Mar 2014, 00:39
B.The first describes evidence that supports a conclusion; the second gives a reason for questioning that support.
BF1 doesn't support the conclusion.
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Re: A large company has recently increased its dividend payments [#permalink] New post 24 Mar 2014, 03:11
Why is B the right answer? In what universe does the fact in BF1 support the conclusion??

Can someone pls elaborate on this.
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Re: A large company has recently increased its dividend payments [#permalink] New post 24 Mar 2014, 05:28
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hi pipe19,
let me try to answer you.
the first boldface(BF1) says company is giving more dividends. this a premise or "FACT". the argument says that share holders think that it is a good sign and stock prices are going to increase. this is the conclusion. the second premise(the whole line along with BF2) states that the conclusion might be wrong because it might be a last ditch effort.
let us look at the options

a) The first is evidence that supports a conclusion; the second is that conclusion
Wrong , the conclusion here is that which is drawn by shareholders. i.e. increasing evidence boosts the stock price. so the second boldface is not the conclusion.

b) The first describes evidence that supports a conclusion; the second gives a reason for questioning that support.
right answer, accurately describes the scenario.

c) The first describes the circumstance that the argument seeks to explain; the second provides evidence in support of the explanation that the argument seeks to establish.
the first is not a circumstance, it is evidence. the evidence is never explained, it is just taken to form a conclusion and later BF2 is given which questions the validity of the conclusion.

d) The first is a premise that is accepted as true; the second is a conclusion that is contrary to the premise.
the first part is true. the second is not the conclusion, it is another premise which gives an alternate explanation for the premise.

e) The first is a premise that is accepted as true; the second seeks to clarify the original premise.
the first part is right. the second does not clarify the premise, rather it tries to clarify the conclusion drawn from the premise.

hope this helps
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Re: A large company has recently increased its dividend payments [#permalink] New post 24 Mar 2014, 10:39
I see what you mean. Because there is a stated connection between BF1 and a premise that supports a conclusion you can say that BF1 supports this conclusion. Thanks!
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Re: A large company has recently increased its dividend payments [#permalink] New post 05 Apr 2014, 12:51
Large company has recently increased its dividend payments to shareholders. ( evidence )
Shareholders had previously been worried about the company's stock price, but are now relieved since increasing dividends generally boosts a company's stock price. ( explaining scenario ) ( cause and effect -- increased div -- boosts stock price )
However,
Conclusion::: the shareholders' optimism may be ill-founded ( how come above evidence says that shareholder optimism is ill founded)

B is not right answer..

E should be the right answer..
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Re: A large company has recently increased its dividend payments [#permalink] New post 05 Apr 2014, 22:29
vinzycoolfire wrote:
hi pipe19,
let me try to answer you.
the first boldface(BF1) says company is giving more dividends. this a premise or "FACT". the argument says that share holders think that it is a good sign and stock prices are going to increase. this is the conclusion. the second premise(the whole line along with BF2) states that the conclusion might be wrong because it might be a last ditch effort.
let us look at the options

a) The first is evidence that supports a conclusion; the second is that conclusion
Wrong , the conclusion here is that which is drawn by shareholders. i.e. increasing evidence boosts the stock price. so the second boldface is not the conclusion.

b) The first describes evidence that supports a conclusion; the second gives a reason for questioning that support.
right answer, accurately describes the scenario.

c) The first describes the circumstance that the argument seeks to explain; the second provides evidence in support of the explanation that the argument seeks to establish.
the first is not a circumstance, it is evidence. the evidence is never explained, it is just taken to form a conclusion and later BF2 is given which questions the validity of the conclusion.

d) The first is a premise that is accepted as true; the second is a conclusion that is contrary to the premise.
the first part is true. the second is not the conclusion, it is another premise which gives an alternate explanation for the premise.

e) The first is a premise that is accepted as true; the second seeks to clarify the original premise.
the first part is right. the second does not clarify the premise, rather it tries to clarify the conclusion drawn from the premise.

hope this helps


Confused ??

In option B : the conclusion which author has mentioned is an intermediate conclusion , But I read everywhere that we need to establish / seek author's main conclusion, which in this question is stake holder optimism is ...

Will some 1 explained ..?
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Re: A large company has recently increased its dividend payments [#permalink] New post 06 Apr 2014, 00:59
There is only one conclusion in this sentence.

(Neutral evidence)A large company has recently increased its dividend payments to shareholders. (Description of a state)(evidence provided in first sentence makes this state more believable)Shareholders had previously been worried about the company's stock price, but are now relieved since increasing dividends generally boosts a company's stock price. However, (Conclusion)the shareholders' optimism may be ill-founded (Premise supporting main conclusion) since spending money on the payment of dividends often indicates that the company has exhausted more lucrative investments for its cash reserves and that the stock price will likely fall in the longer run.

b) The first describes evidence that supports a conclusion; the second gives a reason for questioning that support.
Evidence supports a conclusion... no.. evidence is neutral in nature and it makes premise following it much believable... Thus it is not linked with conclusion... if we consider that second half of option B is refereeing to Shareholders had previously been worried about the company's stock price, but are now relieved since increasing dividends generally boosts a company's stock price. as support ... and it is questioning this part ... then second half of option B looks valid..
Overall this option is not correct... not as clear as GMAT level option.


e) The first is a premise that is accepted as true; the second seeks to clarify the original premise.

The first is a premise that is accepted as true :: something accepted as true is an evidence a fact... Ok
The second seeks to clarify the original premise :: if "Shareholders had previously been worried about the company's stock price, but are now relieved since increasing dividends generally boosts a company's stock price." is original premise and second bold part is clarifying that shareholders believe (optimism) will not sustain in long run...Then E is much much better than any other answer choice.
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Re: A large company has recently increased its dividend payments   [#permalink] 06 Apr 2014, 00:59
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