The Buyer for the Motel Chain Told the Interface Carpet

question 1

Short Answer

The buyer for the motel chain told the Interface carpet salesperson who was selling carpet made of corn instead of petroleum-based nylon, said, "I just have to believe that if I need replacement carpet tile down the road that Interface will not have them because this is some kind of environmental fad." The Interface carpet salesperson responded, "I can assure you the product is not a fad. Interface would not have invested millions of dollars in perfecting this technology if it were a fad." Why is the use of direct denial imprudent in this situation?

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Definitions:

Market Capitalization Rate

The expected rate of return on a portfolio consisting of all publicly traded stocks, used as a measure to value a company's stocks based on the market’s expectations of its future earnings.

Earnings Retention Ratio

A financial metric indicating the percentage of a company's net earnings that is not paid out as dividends, but instead retained for reinvestment.

Excluding Growth Opportunities

The omission or overlooking of potential future projects or investments that could lead to an increase in company value.

ROE

Return on Equity is a measure of a company's profitability relative to shareholders' equity.