There Is a 30% Chance That Any Current Client of Company

question 48

Short Answer

There is a 30% chance that any current client of company A will switch to company B this year.There is a 20% chance that any client of company B will switch to company A this year.If these probabilities are stable over the years, and if company A has 1000 clients and company B has 1000 clients, in the long run (assuming the probabilities do not change), what will the market shares be?

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Definitions:

Dividend

A portion of a company's earnings distributed to shareholders, usually in the form of cash or additional stock.

Treasury Stock

Shares that were once part of the outstanding shares but were bought back by the issuing company.

Common Stock

A type of equity security that represents ownership in a corporation, providing voting rights and a dividend entitlement.

No-par Common Stock

Common stock issued without a par value which means it is not assigned a nominal or face value, but it still represents ownership in a company.