XAT 2020 — Decision Making Question 16
Read the following paragraph carefully and answer the question that follows:
The Small Shop, selling computer peripherals, is the only one of its kind in the remote village of Turturunk. Because online purchases take two weeks or more to arrive, The Small Shop is a quick stop for buying items such as pen drives and USB cables. Besides selling computer peripherals, The Small Shop also undertakes repairs of out-of-warranty products.
An emerging brand offers a franchise to The Small Shop for repairing its products, on a condition that other brands are not to be repaired. Repairs currently account for 15% of its revenues.
Which of the following, if true, will BEST help The Small Shop to decide on the franchise?
Answer & solution
- A
For the first three years, the emerging brand has offered to pay a fixed amount equal to the revenues earned from repairs the previous year.
- B
The upcoming brand is very new and needs franchisees desperately.
- C
No big and reputed brand has shown any interest in franchising The Small Shop.
- D
The Small Shop will have to send two of its employees for a three-month training if it wishes to be a franchisee. The emerging brand will bear the training cost.
Revenues from repairs are expected to increase by about 3-5 percent annually
Though option 1 talks about the shop getting a fixed revenue for the next three years, the future prospects from repairs are not clear. Thus it will not help the shop to decide of the franchise. Option 2 is from the point of view of the franchise and hence not helpful for the shop. Eliminate it. Option 3 is beyond the scope of the passage as it does not mention that the shop is interested in any franchise. Option 4 is also incorrect as the training given to the employees will not have any effect on deciding about the franchise. Only option 5 correctly states that since the revenues from repairs are expected to increase, it will be beneficial to the shop in the long run.
Hence, option (e).