BREAKING: Target Test Prep releases Brand New 2026 On Demand GMAT prep course

Redeem

Target Test Prep · GMAT

Choose how you want to prepare

Learn live with an expert or move at your own pace. Every option includes the complete TTP study system.

★★★★★5.0559 reviews
Vote for Target Test Prep, Newsweek Readers’ Choice Awards 2026
NEWSWEEK READERS’ CHOICE 2026

BIG NEWS! Target Test Prep has been nominated, and they’d love your vote!

TTP has worked incredibly hard to build the best test prep experience possible, and winning Newsweek’s 2026 Readers’ Choice Award for Best Test Prep would mean a lot to them. If TTP has helped you, they’d be incredibly grateful for your vote. You can vote once each day through September 9.

Vote for TTP
GMATLiveTeach 7 seats left
Chris Peckover
NEXT LIVE COHORT

Oct 13 to Jan 7, 2027

with Chris Peckover

Schedule
Tue, Thu · 8:00 to 10:00 PM ET
Included
40 live hours + 6 months of GMAT OnDemand
  • Live instruction and real-time questions
  • Class recordings and assigned practice
View class & enroll
Limited cohort · enrollment openTarget Test Prep
EALiveTeach 5 seats left
Logan Thompson
EXECUTIVE ASSESSMENT

Sep 6 to Dec 6, 2026

with Logan Thompson

Schedule
Sun · 9:30 AM to 12:30 PM ET
Included
40 hours of live online classes plus six months of access to the complete TTP EA OnDemand course.
  • 165+ EA Score Guarantee
  • 4,100+ Quant, Verbal, and Integrated Reasoning practice questions
  • 400+ hours of in-depth video lessons
  • 3,000+ step-by-step video solutions
View EA class & enroll
Limited cohort · enrollment openTarget Test Prep
GMATOnDemand Start anytime
SELF-PACED MASTERCLASS

Target Test Prep GMAT OnDemand

Complete access from day one. Study on your schedule.

715+ score guarantee
$0to start then $127/mo
  • Personalized study plan and analytics
  • Thousands of lessons and practice questions
Start free 5-day trial
Read 559 reviewsTarget Test Prep

Compare the format, schedule, and included access before enrolling. Prices and seat counts shown reflect the supplied offer details.

CR-3

Expert replies
Post new topic Post Reply
Previous Topic Next Topic
Master | Next Rank: 500 Posts
Posts: 227
Joined: Wed Dec 16, 2009 1:15 am
Location: Colombo, Sri Lanka
Thanked: 3 times
by neha.patni » Sun Mar 07, 2010 11:56 pm
Stock analyst: "We believe Company A's stock will appreciate at 35% a year for the next 5 to 7 years. Company A just became the leader in its industry and we expect its sales to grow at 8% a year."
Commentator: "But how can the stock's price be expected to grow more quickly than the company's underlying sales?"
Which of the following facts would best support the stock analyst?
A. The company's expenses will be declining over the next 5 to 10 years.
B. The company just won a patent on a new product.
C. Company A's stock is currently overvalued by a significant amount.
D. The 5 to 7 year time frame is too long for anyone to accurately forecast.
E. Company A's industry peer group is expected to experience stock appreciation rates of 30% over the same time horizon.
Top
Join the discussion
Log in to postLogin with Googleuse password
QUOTE IN REPLY
Source: — Critical Reasoning |
User avatar
Legendary Member
Posts: 1275
Joined: Thu Sep 21, 2006 11:13 pmFollowed by: 2 members
Location: Arabian Sea
Thanked: 125 times

by ajith » Mon Mar 08, 2010 12:31 am
neha.patni wrote:Stock analyst: "We believe Company A's stock will appreciate at 35% a year for the next 5 to 7 years. Company A just became the leader in its industry and we expect its sales to grow at 8% a year."
Commentator: "But how can the stock's price be expected to grow more quickly than the company's underlying sales?"
Which of the following facts would best support the stock analyst?
A. The company's expenses will be declining over the next 5 to 10 years.
B. The company just won a patent on a new product.
C. Company A's stock is currently overvalued by a significant amount.
D. The 5 to 7 year time frame is too long for anyone to accurately forecast.
E. Company A's industry peer group is expected to experience stock appreciation rates of 30% over the same time horizon.
We need to find out a choice to reconcile the apparent paradox presented in the arguments.

A. Correct - Gives an alternate explanation of how profits can grow faster than the sales growth
B. Doesnt give an explanation of how stock price can grow faster than sales
C. That undermines the Analyst's argument
D. Again Undermines the Analyst's Argument
E. Irrelevant Fact

A IMO
Always borrow money from a pessimist, he doesn't expect to be paid back.
Top
Join the discussion
Log in to postLogin with Googleuse password
QUOTE IN REPLY
Master | Next Rank: 500 Posts
Posts: 239
Joined: Wed Feb 11, 2009 2:50 am

by delhiboy1979 » Mon Mar 08, 2010 1:43 am
COuld you explain why E is irrelevant. If the competitor's stocks depreciate does it not imply A's tock grows quickly
Top
Join the discussion
Log in to postLogin with Googleuse password
QUOTE IN REPLY
User avatar
Legendary Member
Posts: 1275
Joined: Thu Sep 21, 2006 11:13 pmFollowed by: 2 members
Location: Arabian Sea
Thanked: 125 times

by ajith » Mon Mar 08, 2010 1:46 am
delhiboy1979 wrote:COuld you explain why E is irrelevant. If the competitor's stocks depreciate does it not imply A's tock grows quickly
competitor's stocks depreciate does it not imply A's tock grows quickly - No it doesn't, it could happen that the industry as a whole is going down

competitor's stocks appreciate does it not imply A's tock grows quickly - No it doesn't, it could happen that A's management did some blunder and A is lagging behind the industry

So answer choice E does not provide any valid bridge between the apparently contradicting statements in the argument.
Always borrow money from a pessimist, he doesn't expect to be paid back.
Top
Join the discussion
Log in to postLogin with Googleuse password
QUOTE IN REPLY
Legendary Member
Posts: 2326
Joined: Mon Jul 28, 2008 3:54 amFollowed by: 2 members
Thanked: 173 times
GMAT Score:710

by gmatmachoman » Mon Mar 08, 2010 2:04 am
neha.patni wrote:Stock analyst: "We believe Company A's stock will appreciate at 35% a year for the next 5 to 7 years. Company A just became the leader in its industry and we expect its sales to grow at 8% a year."
Commentator: "But how can the stock's price be expected to grow more quickly than the company's underlying sales?"
Which of the following facts would best support the stock analyst?
A. The company's expenses will be declining over the next 5 to 10 years.

E. Company A's industry peer group is expected to experience stock appreciation rates of 30% over the same time horizon.
@Ajith!!

Agreed E will be extreme to consider. But A also has hidden assumptions.

It say's expenses are declining. But nothing has been mentioned regarding the degree of percentage It can be nominal say 3% or stellar 50% reduction.

So how to fix that issue??
Top
Join the discussion
Log in to postLogin with Googleuse password
QUOTE IN REPLY
Master | Next Rank: 500 Posts
Posts: 227
Joined: Wed Dec 16, 2009 1:15 am
Location: Colombo, Sri Lanka
Thanked: 3 times

by neha.patni » Mon Mar 08, 2010 2:08 am
thanks ajith
Top
Join the discussion
Log in to postLogin with Googleuse password
QUOTE IN REPLY
User avatar
Legendary Member
Posts: 1275
Joined: Thu Sep 21, 2006 11:13 pmFollowed by: 2 members
Location: Arabian Sea
Thanked: 125 times

by ajith » Mon Mar 08, 2010 2:31 am
gmatmachoman wrote: @Ajith!!

Agreed E will be extreme to consider. But A also has hidden assumptions.

It say's expenses are declining. But nothing has been mentioned regarding the degree of percentage It can be nominal say 3% or stellar 50% reduction.

So how to fix that issue??
Agreed that B may have issues when you take up specific numbers- Since the numbers are not given, there is a possibility that it can explain the paradox. I think that is good enough to consider that it is a valid option
Always borrow money from a pessimist, he doesn't expect to be paid back.
Top
Join the discussion
Log in to postLogin with Googleuse password
QUOTE IN REPLY
Master | Next Rank: 500 Posts
Posts: 232
Joined: Sun Feb 28, 2010 10:47 pm
Thanked: 10 times

by Phirozz » Mon Mar 08, 2010 3:42 am
neha.patni wrote:Stock analyst: "We believe Company A's stock will appreciate at 35% a year for the next 5 to 7 years. Company A just became the leader in its industry and we expect its sales to grow at 8% a year."
Commentator: "But how can the stock's price be expected to grow more quickly than the company's underlying sales?"
Which of the following facts would best support the stock analyst?
A. The company's expenses will be declining over the next 5 to 10 years.
B. The company just won a patent on a new product.
C. Company A's stock is currently overvalued by a significant amount.
D. The 5 to 7 year time frame is too long for anyone to accurately forecast.
E. Company A's industry peer group is expected to experience stock appreciation rates of 30% over the same time horizon.
IMO A. All other options cannot prove that profit is going to rise which is having a bearing on share price
Top
Join the discussion
Log in to postLogin with Googleuse password
QUOTE IN REPLY
Legendary Member
Posts: 610
Joined: Fri Jan 15, 2010 12:33 amFollowed by: 2 members
Thanked: 47 times

by kstv » Mon Mar 08, 2010 10:13 am
IMO E.

In the industry as a whole will grow by 30% then expecting the Market leader to grow by 35% is not a big deal. Also add to that 8% growth in sales.
The analyst is talking about specific figures.

OA please.
Top
Join the discussion
Log in to postLogin with Googleuse password
QUOTE IN REPLY
User avatar
Legendary Member
Posts: 1261
Joined: Sun Sep 14, 2008 3:46 am
Thanked: 27 times
GMAT Score:570

by reply2spg » Mon Mar 08, 2010 10:26 am
OA is A

https://www.admissionsconsultants.com/gm ... soning.asp
Top
Join the discussion
Log in to postLogin with Googleuse password
QUOTE IN REPLY
Master | Next Rank: 500 Posts
Posts: 303
Joined: Sat Aug 22, 2015 10:23 am

by joseph32 » Sun May 15, 2016 11:50 pm
I think A is the right answer here.
Top
Join the discussion
Log in to postLogin with Googleuse password
QUOTE IN REPLY
Post new topic Post Reply
• Page 1 of 1