Cost savings?

Hi! I had a quick question about this Preplounge case called "YodaPhone" - just about the calculation of benefits realized at the end of the case.

The client had additional benefits of $14.1. They had cost savings of 5.4M (original cost was 12M) --> Wouldn't that mean that the total benefits realized after costs = 14.1M - (12M - 5.4M) = 14.1M - 6.6M = 7.4M dollars realized after costs? The solution written on the case seems to calculate benefits realized as (total benefits - cost savings) instead.

A bit confused about the logic of subtracting the amount of costs saved from the benefits realized as opposed to subtracting the actual costs. If anyone could let me know if/how I'm thinking about this the wrong way I'd be super grateful :)

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Clara

Coach

am 28. Aug. 2020

McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

I would recommend you to directly ping the author, he is in PrepL!

Hope it helps!

Cheers,

Clara

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Ian

Coach

am 1. Sept. 2020

Hi there,

Well done! Great catch. You are correct and there is a mistake :)

Instead of subtracting $5.4M, you should subtract $6.6M which is the cost of 5.5 teams for 12 months.

Total benefits realized after costs should be $7.5M.

The case will be updated shortly.