Question Business Case

Question

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! Business Case question

Answer 1

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