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A company is considering investing in one of two new products, product

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Sajjad1994
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A company is considering investing in one of two new products, product [#permalink] New post   Updated on: 14 Feb 2024, 14:01
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Data Insights (DI) Butler 2023-24 [Question #213, Date: Jan-23-2024] [[url=https://gmatclub.com/forum/data-insights-di-butler-419150.html]Click here for Details]

A company is considering investing in one of two new products, product A or product B. The company has gathered data on the expected cost and revenue of each product over the next three years from three different sources: market research, internal financial analysis, and industry experts. The data is presented in the table below. All amounts are in US$.

Year 1
Year 2
Year 3
ProductRevenueCostRevenueCostRevenueCost
A (Market Research)5000040000750006000010000080000
A (Internal Financial Analysis)6000050000800007000010000080000
A (Industry Experts)450003500060000500008500070000
B (Market Research)400003000050000400007000060000
B (Internal Financial Analysis)450003500060000500008000070000
B (Industry Experts)300002000050000300007000050000
(Sort ↕ the table by clicking on the headers)

For each of the following statements, select Yes if the statement is true based on the information provided; otherwise, select No.­­
Yes No
The combined expected profit for product A is higher than that for product B at the end of third year, according to internal financial analysis.
According to all three sources, the expected cost of producing product A is higher than that of producing product B in year 1.
Internal financial analysis predicts a higher profit for product A than for product B in year 2, but market research predicts the opposite.
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The combined expected profit for product A is higher than that for product B at the end of third year, according to internal financial analysis.: Yes According to all three sources, the expected cost of producing product A is higher than that of producing product B in year 1.: Yes Internal financial analysis predicts a higher profit for product A than for product B in year 2, but market research predicts the opposite.: No

Originally posted by Sajjad1994 on 23 Jan 2024, 05:37.
Last edited by Sajjad1994 on 14 Feb 2024, 14:01, edited 3 times in total.
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AbhinavShah14
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Re: A company is considering investing in one of two new products, product [#permalink] New post   23 Jan 2024, 06:28
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Sajjad1994 The Year 1 Profits are not given, is it intentional?
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Sajjad1994
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Re: A company is considering investing in one of two new products, product [#permalink] New post   23 Jan 2024, 07:46
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AbhinavShah14 wrote:
Sajjad1994 The Year 1 Profits are not given, is it intentional?


Fixed!

Thank you.
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bubuster171
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Re: A company is considering investing in one of two new products, product [#permalink] New post   24 Jan 2024, 11:14
Kindly explain the first question.
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Re: A company is considering investing in one of two new products, product [#permalink] New post   24 Jan 2024, 13:50
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bubuster171 wrote:
Kindly explain the first question.


Statement 1: The expected profits for product A are higher than those for product B in all three years, according to internal financial analysis.

We need to look at and compare second row and fifth row

Second row: Product A (Internal Financial Analysis)

A (Internal Financial Analysis) 60000-50000=10000 80000-70000=10000 100000-80000=20000

Profit for three years= 10000+10000+20000=40000

Second row: Product B A (Internal Financial Analysis)

A (Internal Financial Analysis) 45000-35000=10000 60000-50000=10000 80000-70000=10000

Profit for three years= 10000+10000+10000=30000

Hence 40,000>30,000

Answer: Yes
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Re: A company is considering investing in one of two new products, product [#permalink] New post   26 Jan 2024, 08:19
Sajjad1994 wrote:
bubuster171 wrote:
Kindly explain the first question.


Statement 1: The expected profits for product A are higher than those for product B in all three years, according to internal financial analysis.

We need to look at and compare second row and fifth row

Second row: Product A (Internal Financial Analysis)

A (Internal Financial Analysis) 60000-50000=10000 80000-70000=10000 100000-80000=20000

Profit for three years= 10000+10000+20000=40000

Second row: Product B A (Internal Financial Analysis)

A (Internal Financial Analysis) 45000-35000=10000 60000-50000=10000 80000-70000=10000

Profit for three years= 10000+10000+10000=30000

Hence 40,000>30,000

Answer: Yes


“The expected profits for product A are higher than those for product B in all three years, according to internal financial analysis.”
I thought we would only compare year1, year2, year3 seperately. For example, A's profit in year 1 is 10000 which means the same but not higher than B's profit.
Profits in year 2 are also the same for both.
That means "higher" is not true. WHY we combine?
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Re: A company is considering investing in one of two new products, product [#permalink] New post   26 Jan 2024, 08:50
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cathyjiang04 wrote:

“The expected profits for product A are higher than those for product B in all three years, according to internal financial analysis.”
I thought we would only compare year1, year2, year3 seperately. For example, A's profit in year 1 is 10000 which means the same but not higher than B's profit.
Profits in year 2 are also the same for both.
That means "higher" is not true. WHY we combine?



If it meant comparing each year separately, it would say “The expected profits for product A are higher than those for product B in each of the three years, according to internal financial analysis.”

The question could be made a bit more clear, and Ill edit it accordingly.
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Re: A company is considering investing in one of two new products, product [#permalink] New post   05 Feb 2024, 19:14
Statement 2 should be False. B (Internal Analysis) costs for year 1 is equal to B (Industry Experts)
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Re: A company is considering investing in one of two new products, product [#permalink] New post   05 Feb 2024, 20:12
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IanMorgan76 wrote:
Statement 2 should be False. B (Internal Analysis) costs for year 1 is equal to B (Industry Experts)

The catch here is not to compare the cost among the sources.

All sources' analysis say that they individually think product A is going to cost more than product B.

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Re: A company is considering investing in one of two new products, product [#permalink] New post   09 Apr 2024, 03:57
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­The combined expected profit for product A is higher than that for product B at the end of third year, according to internal financial analysis. => Yes

Product A's profit according to internal financial analysis
  • Year 1: 10k
  • Year 2: 10k
  • Year 3: 20k
  • => total 40k
Product B's profit according to internal financial analysis
  • Year 1: 10k
  • Year 2: 10k
  • Year 3: 10k
  • => total 30K
Product A's accumulated profit > Product B's accumulated profit

According to all three sources, the expected cost of producing product A is higher than that of producing product B in year 1. => Yes

Source Market Research: Cost A (40k) > Cost B (30k)
Source Internal financial analysis: Cost A (50k) > Cost B (35k)
Source Industry Experts: Cost A (35k) > Cost B (20k)

Internal financial analysis predicts a higher profit for product A than for product B in year 2, but market research predicts the opposite. => No

Source Internal financial analysis
  • A's profit: 10k 
  • B's profit: 10k
  • A = B
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Re: A company is considering investing in one of two new products, product [#permalink]
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