Strengthening and Weakening Statements
Q. To avoid a hostile takeover attempt, the board of directors of Wellco, Inc., a provider of life and health insurance, planned to take out large loans and use them to purchase a publishing company, a chocolate factory, and a nationwide chain of movie theaters. The directors anticipated that these purchase initially would plunge the corporation deep into debt, rendering it unattractive to those who wanted to take it over, but that steadily rising insurance rates would allow the company to pay off the debt within five years. Meanwhile, revenues from the three new businesses would enable the corporation as a whole to continue to meet its increased operating expenses. Ultimately, according o the directors’ plan, the diversification would strengthen the corporation by varying the sources and schedules of its annual revenues.
Which of the following, assuming that all are equally possible, would most enhance the chances of the plan’s success?
(A) A widespread drought decreases the availability of cacao beans, from which chocolate is manufacture, diving up chocolate prices worldwide.
(B) New government regulations require a 30 percent across-the-board rate rollback of all insurance companies, to begin immediately and to be completed within a five-year period.
(C) Congress enacts a statute, effective after six months, making it illegal for any parent not to carry health insurance coverage for his or her child.
(D) Large-screen televisions drop dramatically in price due to surprise alterations in trade barriers with Japan; movie theater attendance dwindles as a consequence.
(E) A new, inexpensive process is discovered for making paper pulp, and paper prices fall to 60 percent of their former level.
A program instituted in a particular state allows parents to prepay their children’s future college tuition at current rates. The program then pays the tuition annually for the child at any of the state’s public colleges in which the child enrolls. Parents should participate in the program as a means of decreasing the cost for their children’s college education.
Which of the following, if true, is the most appropriate reason for parents not to participate in the program?
(A) The parents are unsure about which pubic college in the state the child will attend.
(B) The amount of money accumulated by putting the prepayment funds in an interest-bearing account today will be greater than the total cost of tuition for any of the pubic colleges when the child enrolls.
(C) The annual cost of tuition at the state’s pubic colleges is expected to increase at a faster rate than the annual increase in the cost of living.
(D) Some of the state’s public colleges are contemplating large increases in tuition next year.
(E) The prepayment plan would not cover the cost of room and board at any of the state’s public colleges.
Why wouldn't the answer be option 'C'?
Q. A recent spate of launching and operating mishaps with television satellites led to a corresponding surge in claims against companies underwriting satellite insurance. As a result, insurance premiums shot up, making satellites more expensive to launch and operate. This, in turn, has added to the pressure to squeeze more performance out of currently operating satellites.
Which of the following, if true, taken together with the information above, best supports the conclusion that the cost of television satellites will continue to increase?
(A) Since the risk to insurers of satellites is spread over relatively few units, insurance premiums are necessarily very high.
(B) When satellites reach orbit and then fail, the causes of failure are generally impossible to pinpoint with confidence.
(C) The greater the performance demands placed on satellites, the more frequently those satellites break down.
(D) Most satellites are produced in such small numbers that no economies of scale can be realized.
(E) Since many satellites are built by unwieldy international consortia, inefficiencies are inevitable.