DSR Industries - CR1000, Test 10 Q5

gmatrant

2. Bonuses at DSR Industries cannot be awarded unless profits exceed a ten percent return on stockholders' investments in the company. Higher profits mean higher bonuses. Therefore, bonuses in a year of general economic recession will be considerably lower than bonuses in a year of peak profits at DSR.

The conclusion above depends on the assumption that
(A) the firm will have relatively low profits in recession years
(B) the amount represented by a ten percent return on stockholders' investments in the company will increase from year to year
(C) profits rarely exceed a ten percent return on stockholders' investments in the company
(D) profits in excess of a ten percent return on stockholders' investments in the company are all distributed in the form of bonuses
(E) bonuses at DSR never drop to zero

Ans : A

My choice and explanation is as below within the spoiler.. can you please tell me why my reasoning wont hold good.

I chose D as negating D impacts the conclusion. How can A be right?
Even if during recession if the firm has lower profits, and in the year during peak if the profits is not given off as bonus, then bonus during peak profits is lower than bonus during recession and if this is not the case then the conclusion will fall through.

pahwa · Posted: Wed Oct 24, 2007 10:33 pm Post subject:

"profits in excess of a ten percent return on stockholders' investments in the company are all distributed in the form of bonuses "

Do you have any information on what percent is distributed? Question doesnot mention about percentage share whatsoever.

Conclusion of question is bonuses in a year of general economic recession will be considerably lower than bonuses in a year of peak profits at DSR.

Link between Bonus and Profit is already mentioned in given question. Hence, play safe and do not cross the scope of question. A is the safest and correct.

jangojess · Posted: Wed Oct 24, 2007 10:54 pm Post subject:

even i went with A in the 1st read...but then was doubtful whether such a simple and staright forward assumption wud be the ans...so tried to overlook the Q which ended up in D............ Sad

pahwa · Posted: Wed Oct 24, 2007 11:21 pm Post subject:

Dont worry.

Just think within the scope and do not mark choices that you are not sure about.

I am starting a new thread TIP OF THE DAY for CR as well by this weekend or early next week, so go through the tips.

Only advice is that I got many assumption problems in my gmat. Thus, would recommend to practice as much as you can.