A Company Introduces a Lucky Draw at Its Retail Outlets

question 20

Multiple Choice

A company introduces a lucky draw at its retail outlets to increase the sale of its products.Which of the following is a primary disadvantage of using this strategy?

• A)It does not provide the firm with any sort of control over the offers.
• B)The sale is likely to decline when the offer is withdrawn.
• C)It will not encourage higher consumption.
• D)It increases consumer risk.
• E)It is difficult to get a good location in the store.

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Definitions:

Cost of Debt

The effective rate a company pays on its current debt, incorporating the tax shield benefits of interest payments.

Asset Beta

A measure of the risk of an asset held in isolation, compared to the market as a whole.

Equity Beta

A metric that measures the volatility of a stock or portfolio in relation to the overall market; a measure of systemic risk.

Capital Structure

The mix of debt and equity that a company uses to finance its operations and growth.