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Charlie s Chainsaw Company has reason to believe that one of

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Charlie s Chainsaw Company has reason to believe that one of [#permalink] New post 10 Oct 2012, 14:28
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A
B
C
D
E

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  35% (medium)

Question Stats:

51% (01:59) correct 49% (01:13) wrong based on 124 sessions
Charlie’s Chainsaw Company has reason to believe that one of its models of saw is defective. A recall of all of the saws would cost more than $5 million, and would probably result in a loss in market share over the next quarter because of bad publicity. Still, a recall is the right economic decision.

Which of the following, if true, most supports the conclusion above?

A. Defective chainsaws can seriously injure or even kill the people who use them.
B. Charlie’s chief rival has recalled two of its products within the past year.
C. Product recalls often result in a perception by customers that a given product is permanently defective, even after the defect has been remedied.
D. The stocks of publicly traded companies that announce product recalls often drop upon the announcement, but they generally return to the
pre-announcement level within 12 months.
E. Three years ago a rival company went out of business because of large punitive damages awarded to a plaintiff who had been injured by a defective chainsaw.
[Reveal] Spoiler: OA

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Re: Charlie s Chainsaw Company has reason to believe that one of [#permalink] New post 11 Oct 2012, 00:45
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+1E

Premise - Charlie’s Chainsaw Company has reason to believe that one of its models of saw is defective. A recall of all of the saws would cost more than $5 million, and would probably result in a loss in market share over the next quarter because of bad publicity

Conclusion - a recall is the right economic decision

Any option which supports the conclusion is our answer

D and E are lucrative enough.

D. The stocks of publicly traded companies that announce product recalls often drop upon the announcement, but they generally return to the pre-announcement level within 12 months. (12 months of loss is loss. We do not have anything to compare this 12 month with. Not the best you want to select)
E. Three years ago a rival company went out of business because of large punitive damages awarded to a plaintiff who had been injured by a defective chainsaw (this is our answer, a loss of 5 million $ is better than going out of business)

:-D

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Re: Charlie s Chainsaw Company has reason to believe that one of [#permalink] New post 11 Oct 2012, 08:37
real life scenario made me go immediately with A without considering other options

but its CRUEL GMAT WORLD , where author can be concerned about the profit
and hence the answer E

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Re: Charlie s Chainsaw Company has reason to believe that one of [#permalink] New post 13 Oct 2012, 21:35
getgyan wrote:
+1E

Premise - Charlie’s Chainsaw Company has reason to believe that one of its models of saw is defective. A recall of all of the saws would cost more than $5 million, and would probably result in a loss in market share over the next quarter because of bad publicity

Conclusion - a recall is the right economic decision

Any option which supports the conclusion is our answer

D and E are lucrative enough.

D. The stocks of publicly traded companies that announce product recalls often drop upon the announcement, but they generally return to the pre-announcement level within 12 months. (12 months of loss is loss. We do not have anything to compare this 12 month with. Not the best you want to select)
E. Three years ago a rival company went out of business because of large punitive damages awarded to a plaintiff who had been injured by a defective chainsaw (this is our answer, a loss of 5 million $ is better than going out of business)

:-D



good stuff getgyan, very nicely explained was torn between D and E...
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Re: Charlie s Chainsaw Company has reason to believe that one of [#permalink] New post 18 Nov 2013, 07:17
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

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Re: Charlie s Chainsaw Company has reason to believe that one of   [#permalink] 18 Nov 2013, 07:17
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