Company X will soon experience dramatic appreciation

Needgmat wrote:Please explain by negation method. Also please explain why E is wrong.

Thanks,

Kavin

This question has some issues. One of the answer choices simply exactly restates something said in the prompt, and the OA is not really an assumption that is necessary for the argument to work. Still, you can tell which answer is, supposedly, correct.

Using negation you would get something along the lines of the following.

(A) Negated: Company X does not have a large market share in its industry.

Market share may or may not affect company and stock price performance, and so this negation is irrelevant.

(B) Negated: Prior to the last five years Company X had not experienced similar growth.

This has no effect on the last five years or the future.

(C) Negated: The growth of Company X is not likely to persist.

This doesn't make sense. The argument stated that the growth is likely to persist. This answer choice is not typical of assumption question answer choices, in that it is a word for word restatement of something said in the prompt.

(D) Negated: The stock price already fully reflects the promising growth prospects of the firm.

Supposedly if this were the case, the stock would not appreciate dramatically, because even though the company is expected to continue to grow its revenues and operating margins, the stock price would already reflect that expected growth, and therefore would not have any reason to increase dramatically. So the argument is supposedly based on the the assumption that the stock price does not already fully reflect the growth prospects.

However, the truth is that stock prices that already reflect future growth can still appreciate dramatically in response to that growth, because the market is not perfect and because the price may appreciate to reflect the fact that some growth has actually occurred. So this CR question is not all that well constructed.

(E) Negated: The stock of Company X will not outperform the stocks of other companies in the same industry.

This does not change the argument. The stock price could appreciate dramatically without outperforming other companies' stocks. For one thing, for all we know, all of the stocks of all the companies in that industry will appreciate dramatically.

So as imperfect as it is, the only answer choice that makes sense is D.