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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

 (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

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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

  1. Ranges penetration basically does not change, but the growth in revenue is approximately 15%  so a is false
  2. We do not know growth rate for 2010 so cannot assume the number (cannot just apply CAGR) so c is false
  3. 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

on Aug 28, 2020
Thank you very much!!
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