You Make the Call-Situation 3

question 83

Essay

You Make the Call-Situation 3
Who hasn't heard of the energy drink Red Bull? It is the 900-pound gorilla in the growing energy drink market. But Hansen Natural Corporation, maker of Monster energy drink, is giving Red Bull a run for its money. The company reaches its core market of males aged 18 to 32 by flooding retailers with giant (16-ounce) cans of its various energy drink offerings, in essence super-sizing the much smaller cans sold by Red Bull. Its striking packaging and oversized cans are helping Monster make inroads in the growing energy drink market.
(Source: Roben Farzad, "Who's Afraid of the Shorts? Not Monster," Business
Week, November 28, 2006, p. 40.)

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Definitions:

Geometric Average Return

The average rate of return on an investment that is compounded over multiple periods, considering the compounding effect.

Compounding

The process where the value of an investment increases because the earnings on an investment, both capital gains and interest, earn interest as time passes.

Dollar-Weighted Returns

A technique for determining the yield of an investment by considering both the magnitude and timing of the cash inflows and outflows associated with it.

Geometric Returns

The average rate of return per period on an investment, calculated by compounding the returns over time.