Werde aktiv in unserer Community aus über 448.000 Gleichgesinnten!

Verabrede dich zum Casen über das Meeting-Board, nimm an Diskussionen in unserem Consulting Q&A teil und finde gleichgesinnte Case-Partner, um dich auszutauschen und gemeinsam zu üben!

McKinsey Sample Case - Logic Question...

case math Math problem McKinsey Value Chain
Neue Antwort am 1. Sept. 2023
2 Antworten
8,6 T. Views
Anonym A fragte am 15. Jan. 2017

http://www.mckinsey.com/careers/interviewing/globapharm

In the quant section of this case, why isn't the correct answer 28.93 percentage points (increasing Phase II success from 40% to 68.93...% - and therefore the value of a product at Phase III from $540M to $607.5M)? That answer would result in a final likely value of $1.35B - which breaks even because it is $150M higher than the current likely final value... and the investment cost is $150M (isn't that the definition of breakeven?).

The answer key assumes that the measure of the $150M investement is the value it adds AT Phase III - and that the $150M should therefore be added to the Phase III value as deduced from the final value of $1.2B. The problem is that using the logic articulated in the answer key would result in a final AT MARKET value of $1.53B - which is significantly higher than the $1.35M that I'm thinking really represents a breakeven proposition.

Any clarifying advice would be helpful. Send me your wisdom!

Thanks! :)

Übersicht der Antworten

Upvotes
  • Upvotes
  • Datum aufsteigend
  • Datum absteigend
Beste Antwort
Anonym antwortete am 11. Apr. 2017

Hi there,

Let me chime in here. First, try to think of this problem in terms of the expected value of the candidate drug:

  • Expected Value = Likelihood of success * Present Value (in case of success)

Second, with this framework in mind, consider two scenarios: (1) Current likelihood of success; (2) Increased likelihood of success.

  1. In this scenario, we have: Expected Value = 70% * 40% * 50% * 90% * $1.2bn Expected Value = 12.6% * $1.2bn = ~$0.15bn => this is your baseline and the $150mn investment in Phase II has to be added to that. Thus, to breakeven, the expected value after the investment has to equal ~$300mn
  2. In this scenario, let's use "x" for the Phase II Likelihood of Success : Expected Value = $0.30bn = 70% * x * 50% * 90% * $1.2bn $0.30bn / $0.38 = x and, thus, x = ~80%

This means that, for the investment to break even, the likelihood of success in phase II would have to equal ~80%, a 40 p.p. increase from the current scenario.

Let me know if you have further questions.

Best

Paulo

War diese Antwort hilfreich?
11
Clara
Experte
Content Creator
antwortete am 1. Sept. 2023
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

Precisely for the high amount of questions (1) asked by my coachees and students and (2) present in this Q&A, I created the “Economic and Financial concepts for MBB interviews”, recently published in PrepLounge’s shop (https://www.preplounge.com/en/shop/prep-guide/economic_and_financial_concepts_for_mbb_interviews).

After +5 years of candidate coaching and university teaching, and after having seen hundreds of cases, I realized that the economic-related knowledge needed to master case interviews is not much, and not complex. However, you need to know where to focus! Hence, I created the guide that I wish I could have had, summarizing the most important economic and financial concepts needed to solve consulting cases, combining key concepts theorical reviews and a hands-on methodology with examples and ad-hoc practice cases.

It focuses on 4 core topics, divided in chapters (each of them ranked in scale of importance, to help you maximize your time in short preparations):

  • Economic concepts: Profitability equation, Break even, Valuation methods (economic, market and asset), Payback period, NPV and IRR, + 3 practice cases to put it all together in a practical way. 
  • Financial concepts: Balance sheet, Income statement/P&L and Performance ratios (based on sales and based on investment), +1 practice case
  • Market structure & pricing: Market types, Perfect competition markets (demand and supply), Willingness to pay, Pricing approaches, Market segmentation and Price elasticity of demand, +1 practice case
  • Marketing and Customer Acquisition: Sales funnel, Key marketing metrics (CAC and CLV) and Churn, +1 practice case

Feel free to PM me for disccount codes for the guide, and I hope it helps you rock your interviews! 

War diese Antwort hilfreich?
Wie wahrscheinlich ist es, dass du uns einem Freund oder Kommilitonen empfiehlst?
0
1
2
3
4
5
6
7
8
9
10
0 = Nicht wahrscheinlich
10 = Sehr wahrscheinlich