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Hi MartyMurray,

Could you help explain this part: "Since the passage says that "a standard contemporary system is sufficiently energy-efficient that it would pay for itself in 10 years," we can infer that the standard contemporary system costs less per year to operate than the antiquated system"?

Based on the information provided, I assume operational costs would include energy cost and cost of others (Ex, system license, maintenance, labor, etc,..). Then, without information of other costs, I think it would be stretched to infer that the standard contemporary system costs less per year to operate than the antiquated system
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Thank you so much for clarifying this! MartyMurray
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sorry, I am confused by 'sufficiently energy efficient that it would pay for itself in 10 years, but no sooner, as compared to the cost of keeping the current system' -how can we conclude this as the most energy-efficient of the three database systems?

it's comparing the ROI and the cost of keeping the current system - which is not apple to apple.
energy efficient = energy consumption
keeping current system = including ops cost (i.e.g energy consumption), insurance cost, potential maintenance cost, depreciation cost etc.

To be honest as a working profession we run our distribution center and look at the cost in our P&L, I really don't find it making sense. Can you guide me through this.
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Hi Marty,

I have an issue with the cost piece. Lets take the case of the innovative system which pays for itself in 5 years. It could cost $5M bucks to purchase and provide $1M in savings per year and hence pay for itself in 5 years. The standard could cost $100K and provide $10k in savings per year... paying itself back in 10 years. It is impossible to determine which one cost more/less with the information provided. Payback formula = costs/savings (or return)
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Agro Enterprises currently uses an antiquated database system. Upgrading to a standard contemporary system would cost a moderate amount, whereas upgrading to an innovative, cutting-edge system would cost much more. A standard contemporary system is sufficiently energy-efficient that it would pay for itself in 10 years, but no sooner, as compared to the cost of keeping the current system. The annual savings in operational costs offered by the innovative system would cause such a system to pay for its purchase and installation in 5 years, but it would be no more energy-efficient than the current system. Or the company could just keep the current system. Any of the three systems would be able to function for the next 20 years.

We see that Agro Enterprises has a choice of three systems:

Antiquated: the current system; would be able to function for the next 20 years

Standard contemporary: sufficiently energy efficient that it would pay for itself in 10 years, in other words, more energy efficient than the antiquated system

Innovative, cutting-edge: savings in operational costs pay for it in 5 years; no more energy efficient than the antiquated system (Notice that we don't know whether it's less energy efficient than the antiquated system.)

Select Standard contemporary system for the option that the passage most strongly suggests is true of the standard contemporary system, and select Innovative, cutting-edge system for the option that the passage most strongly suggests is true of the innovative cutting-edge system. Make only two selections, one in each column.

Costs Agro the greatest total amount of money during 11 years of operation

Since the passage says that the standard contemporary system would pay for itself in 10 years because it's energy efficient, we can infer that, in the 11th year of operation of the standard contemporary system, it will cost less to operate than the antiquated system. So, for the standard contemporary system, we have the costs being the same for 10 years and less for the 11th year, meaning that the standard contemporary system would cost less than the antiquated system to operate for 11 years.

Since that passage says that the innovative, cutting-edge system system would pay for itself in 5 years, because of annual savings in operational costs it offers, we can infer that in years 6 through 11, the innovative system will cost less to operate than the antiquated system after costing the same in the first 5 years as the antiquated system.

So, both new systems would cost less to operate for 11 years than the antiquated system, and thus this choice does not describe either new system.

Eliminate.

Less energy-efficient than either of the other two database systems

Since the passage says that "a standard contemporary system is sufficiently energy-efficient that it would pay for itself in 10 years," we can infer that a standard contemporary system is more energy efficient than the antiquated system.

Regarding an innovative, cutting-edge system, the passage says it is "no more energy-efficient than the current system." Since "no more energy-efficient than the current system" does not mean "less energy-efficient than the current system," the passage does not support the idea that the innovative system is "less energy-efficient than either of the other two database systems." After all, it may be just as energy-efficient as the antiquated system.

So, the passage does not support this choice for either new system.

Eliminate.

The most energy-efficient of the three database systems

Since the passage says that "a standard contemporary system is sufficiently energy-efficient that it would pay for itself in 10 years," we can infer that a standard contemporary system is more energy efficient than the antiquated system.

Since the passage says that an innovative, cutting-edge system is "no more energy-efficient than the current system," the innovative system must also be less energy-efficient than the standard contemporary system.

So, this choice is correct for the standard contemporary system.

Costs Agro, on average, less per year to operate than either of the other systems

Since the passage says that "a standard contemporary system is sufficiently energy-efficient that it would pay for itself in 10 years," we can infer that the standard contemporary system costs less per year to operate than the antiquated system.

Since the passage says that "the annual savings in operational costs offered by the innovative system would cause such a system to pay for its purchase and installation in 5 years, we can see that the innovative system would cost even less per year to operate than the standard contemporary system. After all, a system that pays for itself in 5 years must cost less to operate than a system that pays for itself in 10 years.

Thus, the innovative system costs the least per year to operate.

So, this choice is correct for the innovative, cutting-edge system.

Costs Agro, on average, more per year to operate than either of the other systems

As we saw in our analysis for the previous choice, both new systems cost less to operate than the antiquated system. So, this choice correctly describes the antiquated system rather than either of the two new systems.

Eliminate.

Correct Answer
The most energy-efficient of the three database systems, Costs Agro, on average, less per year to operate than either of the other systems
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could someone please clarify how "sufficiently efficient" translates to the standard system being the most energy efficient of all the three systems? Not clear on this, thanks!
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standard contemporary system is sufficiently energy-efficient that it would pay for itself in 10 years,

"but no sooner, as compared to the cost of keeping the current system" - What does this statement in quotes mean?
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MartyMurray could you please clarify the question above as to how the passage shows that standard system is the MOST energy-efficient, given this phrase ..."but no sooner, as compared to the cost of keeping the current system." Doesn't this statement tell us that keeping the current system will mean paying for itself SOONER than 10 years? Which means the current system (not the standard) would be most energy-efficient as it will pay for itself sooner?
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Hi,
About your issue, I think that the statement (which is "... costs Agro, on average, less per year to operate...") mainly concerns the annual operation expense only, not taking into account the cost to purchase/install it. Let's take the annual operation expense of the current system as the benchmark. The Innovative, compared to the Standard, costs much more to purchase, but has a shorter payback period. It means that the annual savings in operational costs of Innovative is much greater than the Standard's, in other words, Innovative (on average) costs less per year to operate than either of the other systems (save more = cost less).
einstein801
Hi Marty,

I have an issue with the cost piece. Lets take the case of the innovative system which pays for itself in 5 years. It could cost $5M bucks to purchase and provide $1M in savings per year and hence pay for itself in 5 years. The standard could cost $100K and provide $10k in savings per year... paying itself back in 10 years. It is impossible to determine which one cost more/less with the information provided. Payback formula = costs/savings (or return)
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@e-gmat pls help with a video solution for this
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Train your mind to absorb information by reading it. If you are having trouble understand the solution written out step by step, it will help you to train to be able to absorb written information on the GMAT Questions. There won't be videos on your test
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@e-gmat pls help with a video solution for this
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nkim
MartyMurray could you please clarify the question above as to how the passage shows that standard system is the MOST energy-efficient, given this phrase ..."but no sooner, as compared to the cost of keeping the current system." Doesn't this statement tell us that keeping the current system will mean paying for itself SOONER than 10 years? Which means the current system (not the standard) would be most energy-efficient as it will pay for itself sooner?

The phrase "but no sooner, as compared to the cost of keeping the current system" suggests that while the standard system is more energy-efficient than the current system, the financial breakeven point (due to energy savings alone) is not reached before 10 years. It doesn't imply that the current system pays for itself sooner due to energy efficiency; rather, it clarifies that the savings from the standard system's greater efficiency only balance its higher cost at the 10-year mark.
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I agree. There is no clear statement which of the systems is the most efficient.
mollyweasley
could someone please clarify how "sufficiently efficient" translates to the standard system being the most energy efficient of all the three systems? Not clear on this, thanks!
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parkhydel
Agro Enterprises currently uses an antiquated database system. Upgrading to a standard contemporary system would cost a moderate amount, whereas upgrading to an innovative, cutting-edge system would cost much more. A standard contemporary system is sufficiently energy-efficient that it would pay for itself in 10 years, but no sooner, as compared to the cost of keeping the current system. The annual savings in operational costs offered by the innovative system would cause such a system to pay for its purchase and installation in 5 years, but it would be no more energy-efficient than the current system. Or the company could just keep the current system. Any of the three systems would be able to function for the next 20 years.

Select Standard contemporary system for the option that the passage most strongly suggests is true of the standard contemporary system, and select Innovative, cutting-edge system for the option that the passage most strongly suggests is true of the innovative cutting-edge system. Make only two selections, one in each column.

Comparison of the 3 systems:

Current:
Say x units of energy consumption per year.
No cost of purchase and installation.


Standard:
Less than x units of energy consumption per year.
Moderate cost of purchase and installation. Will be recovered in 10 years through energy saving.


Innovative:
About x units of energy consumption per year.
High cost of purchase and installation. Will be recovered in 5 years through reduction in operating costs. So savings in operating costs are a lot.


The passage most strongly suggests what about the standard and the innovative systems?


Costs Agro the greatest total amount of money during 11 years of operation

Unclear what all is a part of "total amount of money". Is there some maintenance fee for example for the systems? No info. Ignore.


Less energy-efficient than either of the other two database systems

We know that Standard is the the most energy efficient. We don't know which is the least. It is either current or innovative but difference between them is likely not much.


The most energy-efficient of the three database systems

This we know is true for Standard system. Select for Standard.


Costs Agro, on average, less per year to operate than either of the other systems

Innovative has huge savings in operating costs compared to current. So much that its cost will be recovered in 5 years. Cost of Standard will be recovered in 10 years so its operating cost is certainly not lower than that of innovative.
Hence, select for Innovative


Costs Agro, on average, more per year to operate than either of the other systems

This is likely the current system.
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