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A newly-opened retail store made $400 profit on the initial

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A newly-opened retail store made $400 profit on the initial

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A newly-opened retail store made $400 profit on the initial expenditure of $25000, and then made $1200 profit on the next $80000 expenditure. By approximately what percent did the ratio of profit to expenditure change from the first $25000 expenditure to the next $80000 expenditure?

A. 6.67% decrease
B. 6.25% decrease
C. 0
D. 6.25% increase
E. 6.67% increase

The OA is B

Source: e-GMAT

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Hi All,

We're told that a newly-opened retail store made $400 profit on the initial expenditure of $25000, and then made $1200 profit on the next $80000 expenditure. We're asked for the approximate percentage change in the ratio of profit to expenditure change from the first $25000 expenditure to the next $80000 expenditure. This question requires the use of the Percentage Change Formula - and you will likely find it helpful to rewrite the given values as individual percentages (instead of fractions).

Percentage Change = (New - Old)/(Old) = Difference/Original

The ratio of the original profit-to-expenditure = 400/25000 = 4/250
The ratio of the second profit-to-expenditure = 1200/80000 = 12/800

We can rewrite those fractions as percents...
4/250 = 16/1000 = 1.6%
12/800 = 1.5/100 = 1.5%

Thus, there was clearly a decrease (from 1.6% to 1.5%). Using the Percentage Change Formula, we have...

(1.6 - 1.5)/(1.6) = 0.1/1.6 = 1/16 = a 6 1/4% decrease.

Final Answer: B

GMAT assassins aren't born, they're made,
Rich

_________________
Contact Rich at Rich.C@empowergmat.com

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swerve wrote:
A newly-opened retail store made $400 profit on the initial expenditure of $25000, and then made $1200 profit on the next $80000 expenditure. By approximately what percent did the ratio of profit to expenditure change from the first $25000 expenditure to the next $80000 expenditure?

A. 6.67% decrease
B. 6.25% decrease
C. 0
D. 6.25% increase
E. 6.67% increase

The OA is B

Source: e-GMAT
The first profit-to-expenditure ratio is:

400/25000 = 4/250 = 2/125 = 16/1000

The second profit-to-expenditure ratio is:

1200/80,000 = 12/800 = 3/200 = 15/1000

Thus, the percent change is:

(15/1000 - 16/1000)/(16/1000) x 100

-1/1000 x 1000/16 x 100 = -1/16 x 100 = -6.25 percent

The negative coefficient is indicative of a decrease; thus, the change was a 6.25 percent decrease.

Answer: B

_________________

Scott Woodbury-Stewart
Founder and CEO
scott@targettestprep.com



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