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A company generates and distributes electricity and gas to households and businesses.
Forecast results for the next financial year are as follows:
The Industry Regulator has announced a new price cap of $2.00 per Kilowatt.
The company expects this to cause consumption to rise by 15% but costs would remained unaltered.
The price cap is expected to cause the company's net profit to fall to:
Suggested Answer: B
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26 comments · newest first
BE
Beth
1 month ago
Definitely option D. A loss seems likely with the new cap.
AD
Adelina
1 month ago
I feel like option A could be right. The increase in consumption might balance it out.
AL
Alaine
2 months ago
I agree! I’m leaning towards option C. More consumption but no cost change.
GA
Gary
2 months ago
This question is tricky! I think the price cap will hurt profits.
SH
Shelia
2 months ago
I’m going with A. Even with the cap, they might still manage a profit.
RE
Rebbecca
2 months ago
I feel like option B might be possible. Increased usage could balance it out.
AN
Antonio
2 months ago
I agree! I’m leaning towards option C. The rise in consumption isn’t enough.
MA
Major
2 months ago
This question is tricky! I think the price cap will hurt profits.
PA
Pamella
3 months ago
I’m not sure. If costs stay the same, maybe option B could still work?
EL
Eloisa
3 months ago
I feel like the consumption increase won't cover the losses. Maybe option D?
GR
Gracie
3 months ago
I agree! I’m leaning towards option C. The profit drop seems realistic.
AV
Avery
3 months ago
This question is tricky! I think the price cap will hurt profits.
MA
Mary
3 months ago
Not so sure about that, seems too optimistic given the cap.
NI
Nina
4 months ago
I'm leaning towards option B, $164 million profit sounds right!
ST
Staci
5 months ago
Wait, how can costs stay the same with rising demand?
ZA
Zana
5 months ago
I think consumption rising by 15% will help offset some losses.
CE
Ceola
5 months ago
Price cap at $2.00 per Kilowatt is a big change!
JO
Jody
6 months ago
I’m leaning towards option B, $164 million profit.
KI
Kimberlie
6 months ago
Totally agree, profit will definitely take a hit.
DO
Douglass
6 months ago
Really? A 15% rise in consumption but no cost changes? Sounds off.
AM
Amber
6 months ago
I think the profit will drop significantly.
GR
Gracia
6 months ago
Price cap at $2.00 per Kilowatt, wow!
LO
Louvenia
6 months ago
I think I recall that with the price cap, the profit could actually decrease despite higher consumption. I’m torn between options A and C, though.
BR
Bronwyn
7 months ago
I feel a bit uncertain about how the unchanged costs play into this. If consumption rises, wouldn't that typically mean more revenue?
VA
Valentin
7 months ago
This question seems similar to one we practiced where we had to adjust profits based on changes in pricing and demand. I think I might lean towards option B, but I need to double-check my calculations.
BR
Brunilda
7 months ago
I remember we discussed how price caps can affect profit margins, but I'm not sure how to calculate the new profit with the increased consumption.