Which of the Following Pricing Strategies Sets the Initial Price

question 114

Multiple Choice

Which of the following pricing strategies sets the initial price low for the introduction of a new product or service, with the objective of building sales, market share, and profits quickly?

• A)Market development pricing
• B)Market extension pricing
• C)Market establishment pricing
• D)Market testing pricing
• E)Market penetration pricing

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Definitions:

Terminal Value (TV)

Value of operations at the end of the explicit forecast period; it is equal to the present value of all free cash flows beyond the forecast period, discounted back to the end of the forecast period at the weighted average cost of capital.

Payback Period

The duration of time it takes for an investment to recoup its initial cost, often used to assess the risk or profitability of a project.

Cash Flows

The net amount of cash being transferred into and out of a business, influencing the company's liquidity, solvency, and overall financial health.

Discounted Payback Method

A capital budgeting technique that calculates the time required to recoup the initial investment in present value terms.