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Automobile Industry

by sivaelectric » Sun Jun 05, 2011 12:39 am
Recently the stock of a large automobile manufacturer rose when the company exceeded analyst' predictions of quarterly revenue by a significant margin. But exceeding predictions would not have caused the stock to rise had it not been for the introduction of a new line of popular vehicles. Therefore the manufacturer should continue to design popular new vehicles to increase its stock price.

Which of the following, if true, would most seriously weaken the conclusion about how to help the stock rise?
  • A. The manufacturer has plans to introduce one new line of vehicles every year.
    B. The new line of vehicles did not contribute to the quarter' total revenue figures.
    C. The value of the stock rose the entire year prior to exceeding analysts' predictions in the recent quarter.
    D. In past quarters where no new vehicle lines were introduced, exceeding analysts' revenue predictions frequently caused the stock to rise.
    E. When manufacturers introduce new vehicle lines, other factors in addition to exceeding revenue predictions sometimes cause their stock to rise.
Last edited by sivaelectric on Sun Jun 05, 2011 1:15 am, edited 1 time in total.
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by chilledlife » Sun Jun 05, 2011 12:53 am
On exceeding analyst predictions the stock of the auto manufacture rose. However, introduction of the new line of popular vehicles was key.
Conclusions: Designing popular new vehicles will increase the company stock price.
We have to find a reason for increase in stock price other than the design of popular vehicles to weaken the conclusion.

A. The manufacturer has plans to introduce one new line of vehicles every year. Out of scope
B. The new line of vehicles did not contribute to the quarter' total revenue figures. Revenue increase + popular vehicles --> high stock price. No mention about the revenue of the new line of vehicles made. Out of Scope.
C. The value of the stock rose the entire year prior to exceeding analysts' predictions in the recent quarter. We do not know why the value of the stock rose. It could be due to the launch of the new line of popular cars or it could be any other reason. Out of Scope.
D. In past quarters where no new vehicle lines were introduced exceeding analysts' revenue predictions frequently caused the stock to rise. Out of Scope. This does not mean that the new line of cars will not help in the rise of stock price.
E. When manufacturers introduce new vehicle lines, other factors in addition to exceeding revenue predictions sometimes cause their stock to rise. Here new cars alone are not responsible for the rise in stock.

IMO E is the correct answer.
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by sivaelectric » Sun Jun 05, 2011 1:19 am
In addition to is the key word in that. Additional reasons are not asked for the stock rise. We should weaken the conclusion by saying that new vehicle release was not the reason for stocks raise. :)
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by cans » Sun Jun 05, 2011 1:54 am
IMO E
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by abidshariff » Sun Jun 05, 2011 2:24 am
well..I guess it's D...the author is making a general statement "Therefore the manufacturer should continue to design popular new vehicles to increase its stock price"...what if in the previous quarters,the stock price did not rise, though the new vehicles were introduced.

E can't be the answer. watch out for "sometimes" in the sentence. So I will assume that most of the times, introduction of new vehicle lines had, indeed, led to the rise in the stocks, and so the statement, partly, supports the author's conclusion.

Moral: Watch out for such words as 'some', 'sometimes', they can be too dangerous in GMAT.
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by sivaelectric » Sun Jun 05, 2011 2:33 am
OA D
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by gmatjeet » Sun Jun 05, 2011 2:50 am
IMHO, the answer should be D.

Question stem concludes that only new lines of cars will help the stock rise. To weaken we need an option which can help in stock rise.
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by HSPA » Sun Jun 05, 2011 3:27 am
This is a causal question and such questions are common in gmat.

conclusion: Rise in stock is due to new car model.
Cause: new car model
effect: stock rise

In order to weaken the conclusion we just need to say that rise in stock is due to some other reason.

D it is.
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by Ozlemg » Sun Jun 05, 2011 12:16 pm
my answer is D

totally agree with HSPA.
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by worldpeace93 » Tue Jun 14, 2011 12:49 am
My answer is D
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by sainagalla » Tue Jun 14, 2011 3:35 am
showing that the effect exists in the absence of the cause will weaken the conclusion. this is best stated in option D.
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