A Large Company Has Profiled Its Current Customer Database Using

question 9

Multiple Choice

A large company has profiled its current customer database using over 150 characteristics including size, credit rating, frequency of purchase, value of purchases, speed of payment, etc. The resulting model predicts with significant accuracy the likelihood of new customers becoming loyal customers. The company has restructured its commission system to reward sales persons who sign up customers matching the computer profile. The bonus is based on the net present value of expected future purchases less a factor for estimated length of collection period. Which measure of shareholder wealth is this performance reward system most consistent with?

• A) Total Shareholder Return (TSR)
• B) Traditional accounting methods
• C) Market Value Analysis (MVA)
• D) Shareholder Value Analysis (SVA)
• E) Economic Value Added (EVA)

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Definitions:

Family Resemblance

The concept of how members of a category share certain characteristics, though there may be no single characteristic common to all.

Mental Representation

Internal, mental symbols, concepts or ideas that stand in for objects, actions, or conditions in the external world, facilitating cognitive processes.

Concept

A mental representation of a category.

Category

A grouping of items sharing one or more similarities.