GMAT Critical Reasoning
Hotco oil burners, designed to be used in asphalt plants, are so efficient that Hotco will sell one to the Clifton Asphalt plant for no payment other than the cost savings between the total amount the asphalt plant actually paid for oil using its former burner during the last two years and the total amount it will pay for oil using the Hotco burner during the next two years. On installation, the plant will make an estimated payment, which will be adjusted after two years to equal the actual cost savings.
Which of the following, if it occurred, would constitute a disadvantage for Hotco of the plan described above?
- A Another manufacturer's introduction to the market of a similarly efficient burner
- B The Clifton Asphalt plant's need for more than one new burner
- C Very poor efficiency in the Clifton Asphalt plant's old burner
- D A decrease in the demand for asphalt
- E A steady increase in the price of oil beginning soon after the new burner is installed
Correct Answer: E