A new company can offer stocks in an initial public offering

[BTGmoderatorDC]

A new company can offer stocks in an initial public offering (IPO) before the company has proven itself capable of generating long-term profits for its stockholders. Historically, if a compasny has seemed likely to generate profits, the stock price in the IPO has risen; if the company seemed less likely to generate profits, the stock price in the IPO has fallen. Today business analysts announced that the Tenon Corporation has turned a profit in the financial quarter just completed. Therefore, stock prices for the Tenon Corporation's IPO, which is planned for next week, will rise.

The author's conclusion about Tenon Corporation is based on faulty reasoning because it

A. depends on the assumption that what has been true in the past will hold true in the future.
B. relies on a line of reasoning that is circular.
C. confuses cause with effect.
D. overlooks cases in which the counter-example is true.
E. rests on a faulty comparison.

OA A

Source: Princeton Review

[deloitte247]

OPTION A:- CORRECT
This is true. The authors conclusion is completely based on the assumption that what is true in the past will hold in the future. meaning that, because its been historically proven that if a company has seem likely to generate profits. The stock of the IPO has risen, if the company seems less likely to generate profits, the stock of the IPO has fallen. The author's conclusion relies solely on this assumption and therefore makes it faulty.

OPTION B:- INCORRECT
Circular in the sense that involving reasoning that uses the argument or proof a conclusion to be proved or one of its unproved consequences. The author's conclusion about the Tenon corporation isn't faulty based on the fact that its line of reasoning is circular because it has been proven and its consequences are well known.

OPTION C:- INCORRECT
The argument has no history of confusing cause with effect, so the author's conclusion isn't based on the faulty reasoning because it confused fact with effect.

OPTION D:- INCORRECT
The argument didn't provide a case to which the counter - example is true, so the author's conclusion can't be based on the fact that it overlooks the counter example because there was non to begin with.

OPTION E:- INCORRECT
The argument has a firm foundation based on its historical achievements which seems to be true, therefore the arguments isn't faulty and can't serve as a faulty ground to which a conclusion is drawn from.