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Critical Reasoning: Paradox Questions

Financial Advisor: Company B has monthly expenses that amount to thousands of dollars, but the company has not created any revenues yet. Still, several leading entrepreneurs have recently decided to invest in it.

Which of the following might best explain the Financial Advisor's report in light of Company B's status?

Incorrect.

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This answer does nothing to resolve the paradox. Just because the company is competing in a lucrative market doesn't mean it will actually succeed in it.

Incorrect.

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This answer choice cannot resolve the paradox. Since we know nothing about the companies projected profits and since right now it has no profits whatsoever, the prospect of having profits reinvested in the company is irrelevant. We still do not know what made the Company B attractive to the investors.

Incorrect.

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This answer choice refers to the suspicion that the financial advisor may have a personal interest in Company B. However, the fact that the advisor met with the founders does not automatically means he or she has personal interest in the company.

Incorrect.

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This answer choice fails to resolve the paradox as the exact details about how the expenses of Company B are broken down are irrelevant, and cannot help explain why investors are interested in this company.

Fantastic work!

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This answer choice resolves the paradox by exposing the reason for which entrepreneurs decided to invest in the company. Since the company is still developing its product, it is still not making any money, but in the future, its product is expected to do exceedingly well.

The company's products or services are sold in a particularly lucrative market.
A high percentage of Company B's projected profit is expected to be reinvested into the company to encourage further growth.
The financial advisor who wrote the article has met with the founders of Company B several times.
Much of Company B's expenses are spent on wages, as their product relies on the employees skill.
Company B is in the process of developing its flagship product, which, upon release is expected to become a huge success.