Assuming no household owns more than one refrigerator, range or washer, which of the following conclusions is true based on data provided in Exhibit#1? (a) Average unit price in ranges is decreasing since 2002 (b) Washer prices should increase by over 40% until 2009 (c) Total market for the three categories will be of at least $8.8B by 2010 (d) Penetration of washers will be growing at above 5% annual rate until 2009 Answer is B, how can I get the price for every one of them or why I should assume that? Thank you very much!

Hi, The key to this answer lies in the penetration numbers Ranges penetration basically does not change, but the growth in revenue is approximately 15% so a is false We do not know growth rate for 2010 so cannot assume the number (cannot just apply CAGR) so c is false For washers - penetration grows from 52% to 62% over 4 years. If it grows at 5% a year then in year 5 it will grow by AT LEAST 20% (but much more because of compounding) so d is out Hence you are left with B. B also makes sense as washers are doubling in sales so 40% increase in prices given 10% increase in penetration does not sound off Best, Udayan

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Brenda

on Aug 28, 2020

Global

Question Business Case

Assuming no household owns more than one refrigerator, range or washer, which of the following conclusions is true based on data provided in Exhibit#1?

(a) Average unit price in ranges is decreasing since 2002

(b) Washer prices should increase by over 40% until 2009

(d) Penetration of washers will be growing at above 5% annual rate until 2009

Answer is B, how can I get the price for every one of them or why I should assume that?

Thank you very much! Business Case question

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Top answer

Udayan

Coach

edited on Aug 27, 2020

Top rated Case & PEI coach/Multiple real offers/McKinsey EM in New York /12 years recruiting experience

Hi,

The key to this answer lies in the penetration numbers

Ranges penetration basically does not change, but the growth in revenue is approximately 15% so a is false
We do not know growth rate for 2010 so cannot assume the number (cannot just apply CAGR) so c is false
For washers - penetration grows from 52% to 62% over 4 years. If it grows at 5% a year then in year 5 it will grow by AT LEAST 20% (but much more because of compounding) so d is out

Hence you are left with B. B also makes sense as washers are doubling in sales so 40% increase in prices given 10% increase in penetration does not sound off

Best,

Udayan