Assume That 53% of All Customers Will Take Free Samples

question 13

Multiple Choice

Assume that 53% of all customers will take free samples. Furthermore, of those who take the free samples, assume that about 32% will buy what they have sampled. Suppose that you set up a counter in a supermarket offering free samples of a new product and that the day you were offering free samples, 403 customers passed by your counter. What is the probability that a customer will take a free sample and buy the product? [Hint: Use the multiplication rule for dependent events. Notice we are given the conditional probability P(buy, given sample) = 0.32, while P(sample) = 0.53.]

• A)0.320
• B)0.604
• C)0.210
• D)0.170
• E)0.530

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Definitions:

Firm Value

The total value of a company, considering all sources of capital including debt and equity.

Required Return

The minimum expected return on an investment needed by an investor, factoring in the risk associated with the investment.

Initial Cash Outflow

Initial cash outflow refers to the amount of money a business or investor must spend upfront to initiate a project, investment, or acquisition.

Cash Inflows

The total amount of money being transferred into a business, typically from operational, investment, and financing activities.