Scenario 2-2 Brush Strokes Is an Art Supply Store Located in a in a Town

question 7

Multiple Choice

Scenario 2-2
Brush Strokes is an art supply store located in a town with a population of about 100,000 people. The town is also home to a major state university. Brush Strokes gets a majority of its business from the student population. It has used the services of a local full-service advertising agency in the past. A great majority of its marketing budget has gone toward running small advertisements in the local and school newspapers at the beginning of each term. The advertising agency is now recommending that Brush Strokes devote a majority of its budget to running television spots during broadcasts of the university's football and basketball games. While the owners of Brush Strokes agree that they could be doing a better job of reaching the student population, they have not come to any conclusions about the best way to accomplish this.
-(Scenario 2-2) In all likelihood, with which one of the following would Brush Strokes's full service agency be least qualified to handle?

• A) Forecasting dividend earnings of stockholders.
• B) Creating a 30-second television commercial
• C) Interpreting research on the student market
• D) Creating a competitive position against other art supply stores

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Definitions:

Present Value

The present worth of a future sum of money or series of cash flows, considering a given return rate.

Compound Interest

In this method, interest is accrued on the principal sum as well as on the interest that has been accumulated over prior periods of the investment or loan.

Earnings Rate

The rate of return on an investment or the rate at which a company or asset is generating income, often expressed as a percentage.

Capital Rationing

A financial strategy employed by companies to limit or restrict the amount of new investments or projects they undertake due to limited resources.