A Company Is Considering Producing Some New Gameboy Electronic Games

question 135

Multiple Choice

A company is considering producing some new Gameboy electronic games.Based on past records,management believes that there is a 70 percent chance that each of these will be successful and a 30 percent chance of failure.Market research may be used to revise these probabilities.In the past,the successful products were predicted to be successful based on market research 90 percent of the time.However,for products that failed,the market research predicted these would be successes 20 percent of the time.If market research is performed for a new product,what is the probability that the results indicate a successful market for the product and the product is actually not successful?

• A)0.63
• B)0.06
• C)0.07
• D)0.24
• E)0.27

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Definitions:

Total Asset Turnover

A measure of how efficiently assets are employed by a company to generate revenue from sales.

Equity Multiplier

A financial ratio that measures a company's total assets financed by its shareholders' equity, indicating leverage level.

Return On Equity

A measure of a corporation's profitability, indicating how much profit a company generates with the money shareholders have invested.

Debt-Equity Ratio

A measure that indicates the balance between equity contributed by shareholders and debt employed to finance company assets.