Which Strategy, Intended to Maximize Profitability by Offering New Products

question 151

Multiple Choice

Which strategy, intended to maximize profitability by offering new products at a premium price, did Apple use when introducing the iPod?

• A) skimming pricing
• B) matching the competition
• C) everyday low pricing
• D) penetration pricing

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Definitions:

Internal Rate of Return

A metric used in capital budgeting to estimate the profitability of potential investments, represented as the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Net Present Value

A valuation method that calculates the present value of expected future cash flows minus the initial investment cost.

Capital Investment Project

A project requiring significant amounts of capital for the purchase, improvement, or maintenance of long-term assets to generate future benefits.

Cash Flows

The sum total of currency transactions inbound and outbound in a firm, markedly affecting its cash-on-hand.