Since Tract Home Builders Are Price-Sensitive Because They Cannot Charge

question 14

Multiple Choice

Since tract home builders are price-sensitive because they cannot charge price premiums over their competitors, Arbol Industries charged this segment prices based on

• A) a commodity index.
• B) a premium pricing strategy.
• C) a bundled offering.
• D) competitors' prices.
• E) cost-plus pricing.

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Definitions:

Present Value Method

A financial calculation that determines the current worth of a future sum of money or stream of cash flows given a specific rate of return.

Ignore Present Value

A decision to not consider the current worth of future cash flows or payments, often applied in financial analysis.

Average Rate of Return

A financial ratio used to estimate the profitability of an investment, calculated as the net profit divided by the initial cost of investment.

Average Rate of Return

A method of assessing the profitability of an investment by dividing the average annual profit by the initial investment cost.