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Morgane

on Jul 04, 2020

Global

Question about

Calculation of new costs (last part of case)

Hi,

Thanks for this great case.

I have a question regarding the new costs to be calculated with the IT investment.

The equation is New cost = Investment*Percentage to be paid by client – Savings in months 0-6 – Savings in months 6-12.

However, in months 0-6 the price of rent is 62K (same as without the IT investment), and it only goes down to 52K in month 6-12. Therefore we should only save 6x10K and not 6x10K + 6x20K ?

Thanks!

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Top answer

Francesco

Coach

edited on Jul 05, 2020

#1 Coach for Sessions (4.500+) | 1.500+ 5-Star Reviews | Proven Success: ➡ interviewoffers.com | Ex BCG | 10Y+ Coaching

Hi Morgane,

thanks for solving my case.

It is a bit difficult to identify it in the graph due to the colors, however the rental cost in District B without IT investment is 72K before the investment. The 62K instead refers to Other costs.

PrepLounge case graph

In case you have any other questions or comments please feel free to contact me.

Best,

Francesco

2 comments

Jing

on Aug 11, 2022

Hi Francesco,

The question says the graph is showing "the decrease in retail cost". Wondering why the saving is 10k and 20k rather than 52k and 62k directly read from the graph?

Thanks
Jing

Francesco

Coach

on Aug 12, 2022

#1 Coach for Sessions (4.500+) | 1.500+ 5-Star Reviews | Proven Success: ➡ interviewoffers.com | Ex BCG | 10Y+ Coaching

Hi Jing, the graph indeed shows the decrease in rent cost, but the axes are about the rent per month. Consequently, 62k in 0-6 refers to the rent per month in that period (that is, 10k in decrease given the original value was 72k). Hope that clarifies, if not please let me know. Best, Francesco