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Over the past 5 years, Company X has posted double-digit

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Over the past 5 years, Company X has posted double-digit [#permalink] New post 18 Oct 2010, 21:05
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Over the past 5 years, Company X has posted double-digit growth in annual revenues, combined with a substantial improvement in operating margins. Since this growth is likely to persist in the future, the stock of Company X will soon experience dramatic appreciation.

The argument above is based on which of the following assumptions?

A)Company X has a large market share in its industry.
B)Prior to the last 5 years, Company X had experienced similarly dramatic growth in sales associated with stable or improving operating margins.
C)The growth of Company X is likely to persist in the future.
D)The current price of the stock of Company X does not fully reflect the promising growth prospects of the firm.
E) The stock of Company X will outperform other stocks in the same industry.
[Reveal] Spoiler: OA

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Re: Assumption CR (500-600 level) [#permalink] New post 18 Oct 2010, 21:41
Use POE.

A)Company X has a large market share in its industry.
Irrelevant. Does not tell us how the value of the company's stocks will appreciate.

B)Prior to the last 5 years, Company X had experienced similarly dramatic growth in sales associated with stable or improving operating margins.
This tells us that the Sales increased when the operating margins improved. Does not say anything about stock value.

C)The growth of Company X is likely to persist in the future.
Restatement. Does not say anything about stock value.

E) The stock of Company X will outperform other stocks in the same industry.
Comparison with stocks of other companies is irrelevant.

D)The current price of the stock of Company X does not fully reflect the promising growth prospects of the firm.
Correct answer. Author is assuming that the price of the stock should be/will be higher due to the growth in revenues and improvement in operating margins.
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Re: Assumption CR (500-600 level) [#permalink] New post 18 Oct 2010, 22:17
D
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Re: Assumption CR (500-600 level) [#permalink] New post 09 Nov 2010, 14:30
Isn't it too hard to assume D....any better explanation?
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Re: Assumption CR (500-600 level) [#permalink] New post 10 Nov 2010, 05:43
amma4u wrote:
Isn't it too hard to assume D....any better explanation?

Negate D.

The answer choice becomes:
The current price of the stock of Company X [strike]does not[/strike] fully reflects the promising growth prospects of the firm.

So it means that the growth and increasing OPM has already been factored in. So no more scope of growth in share value.

D is clearly the answer.
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Re: Assumption CR (500-600 level) [#permalink] New post 10 Nov 2010, 11:15
Agree with yossarian84. Negation works best here.
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Re: Assumption CR (500-600 level) [#permalink] New post 25 Jan 2011, 10:02
D is correct. But this is a really good question.
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Re: Assumption CR (500-600 level) [#permalink] New post 26 Jan 2011, 08:23
D, straight, easy... wish all GMAT questions were like this one
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Re: Assumption CR (500-600 level) [#permalink] New post 27 Jan 2011, 07:20
D. good question
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Re: Assumption CR (500-600 level) [#permalink] New post 27 Jan 2011, 13:56
D. easy one. No more than 1 contender for OA.
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Re: Assumption CR (500-600 level) [#permalink] New post 27 Jan 2011, 14:45
for those using negation technique- keep in mind that it is logical negation that works all the time and not the exact opposite. Check out the Powerscore Bible for more on that technique
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Re: Assumption CR (500-600 level) [#permalink] New post 27 Jan 2011, 16:44
What is the source of the question?

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Re: Assumption CR (500-600 level)   [#permalink] 27 Jan 2011, 16:44
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