Chapter 13 Exam Questions With Verified
Answers.
Cameco Inc., based in Saskatoon, Saskatchewan, is the world's largest energy producer in its
sector, producing almost 29% of the world's supply. It has experienced exceptional growth
during the past five years, with revenue increasing on average ...
Cameco Inc., based in Saskatoon, Saskatchewan, is the world's largest energy producer in its
sector, producing almost 29% of the world's supply. It has experienced exceptional growth
during the past five years, with revenue increasing on average by 21% per year and net earnings
increasing by 46%. This period of expansion followed a protracted period of negative demand
growth for its products.
In what type of industry is Cameco Inc. most likely participating?
a)Defensive
b)Speculative
c)Mature
d)Cyclical - answer✔d)That's correct.
Cameco Inc., based in Saskatoon, Saskatchewan, is in a cyclical industry: the production of
uranium.
What is the most likely source of growth for Cameco Inc.?
a)An increase in overall market demand.
b)A reduced level of competitive intensity in the market.
c)Increased productive capacity.
d)All of the above. - answer✔d)That's correct.
All of these factors are responsible for Cameco's exceptional growth. Substantial supplies of
uranium were released following the end of the Cold War and decommissioning of nuclear
weapons.
As well, there was significant consumer opposition to nuclear as a source of electricity. The
recent strong growth cycle has been fostered by the growing acceptance of nuclear energy. In
addition, there has been a dramatic global expansion of nuclear plants under construction in
currently non-nuclear countries such as India and China.
Cameco has been able to increase its productive capacity significantly and has a very active
exploration program.
You are preparing a report on the food and beverage industry. Part of your research reveals that
consumers in the industry tend to switch between product brands as product prices change, even
if the price change is small. If you ran a company in this industry would you consider this
consumer behaviour good or bad for your company's operations?
a)Good, because dropping price means market share will increase
b)Good, because it shows that competition is healthy.
c)Bad, because it places a limit on product price increases.
d)Bad, because it shows the industry is declining. - answer✔c)If consumers are willing to
quickly substitute between products this is an indication that brand loyalty is quite low. For a
company in this industry, it also indicates that they are limited as to how much they can raise the
prices on their products. In general, increased competition and selection is good for the
consumer, but for companies in the industry it could also lead to smaller or declining profit
margins.
Ladies apparel specialty store A offers affordable fashions to the 25-45 age group. It is a well-
established chain with loyal customers and continues to grow profitably at industry rates. Ladies
apparel specialty store B offers a combination of novelty and proven classic merchandise to
maturing baby boomers ages 35 to 65. It is a newer retail concept that is locating in major
regional malls. Its overall revenue and profitability reflect the development stage that it is in.
Which of these chains would represent the better investment opportunity and why?
a)Chain A because it has a proven level of profitability.
b)Chain A because it has relatively less risk as a result of its loyal customer base.
c)Chain B because it has much higher growth potential.
d)Chain B because it has a substantial profit opportunity as an early mover in its market segment.
- answer✔a)Each of these chains has its own set of dynamics, relevant risks, and potential
returns, which are the basis of any potential investment.
Chain B appears to have significant potential if only through natural growth in its target market.
How well it implements growth plans will ultimately determine its success.
Chain A is a proven retail concept with ongoing profitability. There is no right answer to this
Through the 10-year period ending in 2007, CT Corporation reported average annual growth in
revenue of 7.06% while RO Inc. reported 19.99%. Which of these companies should be
considered the better potential investment?
a)CT Corporation
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