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2

Constructive criticism of PrepLounge's mock PST Test 1

Hello everybody,

I have recently bought PrepLounge's PST mock number 1. I went through it as a trial (first PST test I am taking, haven't seen the McKinsey official mocks), and have a number of questions about it, as I do believe there are a number of mistakes and inconsistencies in it. I would therefore need a clarification about some questions. Specifically, I need some help with the following:

Q3: Ceteris paribus, options b, c and d are all correct. Indeed, if costs are the same and revenues rise, then profits will rise. Though options c and d will result in increasing revenues, if we assume costs stay the same, they will also result in increased profits. Option b acts directly on a constituent of profits (P = R - C, it acts on C) so in the context of the mock this may be the "best" answer. Is this how candidates should think about these kind of problems (that is, what is the "best" answer)?

Q6: This is actually a really long question for 2 minutes or slightly more.

Q8: I did answer a (the correct one), but I do believe c could be viable as well. The answers exclude c by saying that the firm does not offer purchases on account, but nowhere is it stated that rival firms do offer purchases on credit. The "only" bit of option c does not imply such a thing ("only" does not necessary refer to firms operating in the same industry - perhaps they are referring to online payments in general, where one could be buying products on credit).

Q10: The objective of the firm is to keep profits stable and be compliant with EU regulations. Option a could do both, so it is not the correct solution. However, options b, c and d all have some flaws, and I don't see why b is the correct solution. Option b would move the firm towards compliance, though will most likely lower profits (it would surely decrease revenues and costs, though in practice it would probably lower revenues more than costs and hence lower profits as a result). Also, if the firm operates hundreds of nuclear plants, shutting one down won't affect profits much. Option c in nonsensical, as the initial text clearly states that investing in clean energy will prove impossible for the firm (last paragraph, page 6). Moreover, it is not given that such an action will result in profits for the firm at all. Option d will move the firm towards compliance, but it is not guaranteed that such an action will prove to be profitable either (it depends on the elasticities involved, which are not given). Therefore, I don't understand why b is the correct answer (the reasoning given in the answers is very vague and is in my opinion simply not sufficient to exclude options c and d).

Q14: Options a and d are clearly wrong. I understand why b is the preferred answer, but ironically c is, in a way, a form of efficiency (more output - in this case price - for the same input). This one is a pretty minor remark, and can be ignored :)

Q15: The answer is actually wrong. The discount is 15%, not 25% as implied by the answers. The correct answer is 63%, which is not a given option.

Q18: The text above the question has GWH under point 4 instead of GWh. The correct terminology is GWh. GWH is not scientifically correct and is not used throughout the paper (the other bits use GWh correctly). This has been very confusing during my trial, as I did not think of it as a unit of measure, but as some sort of segmentation of clean energy (which has proven very bothersome under time pressure!).

Q19: Answers b and c both encompass all the markets geographically and encompass the financial side of the case as well. It is unclear to me why c is right and b is wrong (by reading the answers).

Q24: The product comprises milk and a topping. Most likely, the toppings are more expensive than the milk. The problem is that the yoghurts are more expensive as a result of an increase in the price of milk. By lowering the % of milk we are not combating the increase in price in the product. Indeed, we are making it worse. Justifying it by saying that perhaps the price of the toppings is lower than the price of milk would be analogous to invalidating Q17 by requiring candidates to know that Norway is not an EU member state (though ironically most EU subsidies do apply to EEA member states as well...). This is, in my opinion, common knowledge (fruits are more expensive than milk!) and should not be used as a way to imply the correct answer.

Sorry for appearing sassy, but I was honestly puzzled by some answers!

Regards! :)

Hello everybody,

I have recently bought PrepLounge's PST mock number 1. I went through it as a trial (first PST test I am taking, haven't seen the McKinsey official mocks), and have a number of questions about it, as I do believe there are a number of mistakes and inconsistencies in it. I would therefore need a clarification about some questions. Specifically, I need some help with the following:

Q3: Ceteris paribus, options b, c and d are all correct. Indeed, if costs are the same and revenues rise, then profits will rise. Though options c and d will result in increasing revenues, if we assume costs stay the same, they will also result in increased profits. Option b acts directly on a constituent of profits (P = R - C, it acts on C) so in the context of the mock this may be the "best" answer. Is this how candidates should think about these kind of problems (that is, what is the "best" answer)?

Q6: This is actually a really long question for 2 minutes or slightly more.

Q8: I did answer a (the correct one), but I do believe c could be viable as well. The answers exclude c by saying that the firm does not offer purchases on account, but nowhere is it stated that rival firms do offer purchases on credit. The "only" bit of option c does not imply such a thing ("only" does not necessary refer to firms operating in the same industry - perhaps they are referring to online payments in general, where one could be buying products on credit).

Q10: The objective of the firm is to keep profits stable and be compliant with EU regulations. Option a could do both, so it is not the correct solution. However, options b, c and d all have some flaws, and I don't see why b is the correct solution. Option b would move the firm towards compliance, though will most likely lower profits (it would surely decrease revenues and costs, though in practice it would probably lower revenues more than costs and hence lower profits as a result). Also, if the firm operates hundreds of nuclear plants, shutting one down won't affect profits much. Option c in nonsensical, as the initial text clearly states that investing in clean energy will prove impossible for the firm (last paragraph, page 6). Moreover, it is not given that such an action will result in profits for the firm at all. Option d will move the firm towards compliance, but it is not guaranteed that such an action will prove to be profitable either (it depends on the elasticities involved, which are not given). Therefore, I don't understand why b is the correct answer (the reasoning given in the answers is very vague and is in my opinion simply not sufficient to exclude options c and d).

Q14: Options a and d are clearly wrong. I understand why b is the preferred answer, but ironically c is, in a way, a form of efficiency (more output - in this case price - for the same input). This one is a pretty minor remark, and can be ignored :)

Q15: The answer is actually wrong. The discount is 15%, not 25% as implied by the answers. The correct answer is 63%, which is not a given option.

Q18: The text above the question has GWH under point 4 instead of GWh. The correct terminology is GWh. GWH is not scientifically correct and is not used throughout the paper (the other bits use GWh correctly). This has been very confusing during my trial, as I did not think of it as a unit of measure, but as some sort of segmentation of clean energy (which has proven very bothersome under time pressure!).

Q19: Answers b and c both encompass all the markets geographically and encompass the financial side of the case as well. It is unclear to me why c is right and b is wrong (by reading the answers).

Q24: The product comprises milk and a topping. Most likely, the toppings are more expensive than the milk. The problem is that the yoghurts are more expensive as a result of an increase in the price of milk. By lowering the % of milk we are not combating the increase in price in the product. Indeed, we are making it worse. Justifying it by saying that perhaps the price of the toppings is lower than the price of milk would be analogous to invalidating Q17 by requiring candidates to know that Norway is not an EU member state (though ironically most EU subsidies do apply to EEA member states as well...). This is, in my opinion, common knowledge (fruits are more expensive than milk!) and should not be used as a way to imply the correct answer.

Sorry for appearing sassy, but I was honestly puzzled by some answers!

Regards! :)

(edited)

Hello, anyone from staff willing to help here? — Anonymous A on Aug 01, 2019

Hi there! Thank you very much for your detailed feedback. We really appreciate you taking the time for this and helping us improve our test. We started to review your feedback and will make sure to get back to you next week. Sorry for the delay. Best — Astrid on Aug 08, 2019

Thank you! — Anonymous A on Aug 08, 2019

2 answers

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Best Answer

Hi there,

We took the time to thoroughly review the PST and here is our feedback to each point you have made:

  • Q3: B is the correct answer since it explains clearly and without any extra assumptions why profits are different. Altough C and D explain revenue differences you would imply a cost assumption (for instance no costs) if you picked them as the correct answer. An answer that includes an implicit assumption (that you cannot clearly prove) cannot be the "best" answer to explain a certain fact.
  • Q6: Very long indeed. The challenge here is about "picking the right battles". A good candidate deprioritizes answering this question and skips it for the moment.
  • Q8: Answer C offers a possible explanation for this observation. However, it does not explain this observation the LEAST. "Only" implies that the current payment options are not as diverse as usual (but we agree that we could have made it more obvious. We will adjust the wording asap). If C would be correct you assumed that other companies have fewer payment options (as you said no credit card for instance). As such a thing is not stated anywhere that is a way "bigger" implicit assumption than assuming that "only" implies less payment options compared to competitors. Interpreting "only" as we did, will offer a good explanation for this observation. Since we are looking for a statement that explains this observation the LEAST, answer C should thus be omitted.
  • Q10: Answer B is correct since - again - it involves less implicit assumptions than the other options do. It is clearly and explicitly stated that the CEO is highly concerned about profit setbacks that will be caused by drawing money from nuclear energy and fossil fuels. Since shutting down a nuclear power plant will exactly do that, this option is clearly not what the CEO is looking for. Although it could (not yet enough data to assess) be a viable option from an outside external perspektive, this question does not refer to an neutral outside-in view, but rather refers to what the CEO is looking for.
  • Q14: Answer B does not need additional assumptions and thus is the correct answer. Building a brand that justifies higher prices implies that energy is not a commodity and prices can be set by a company (and is not set by the market).
  • Q15: You are absolutely right. We will correct that mistaken discount. Thanks for reporting this.
  • Q18: Again, you are right. We will be updating to the correct term "GWh" asap
  • Q19: Answer C is correct since that is what the CEO explicitly stated. She wants to gain a better understanding of the underlying trends that drive the differences of revenues/profits between geographies. Thus she is asking for a financial analysis and a possible solution (meaning fixing profit losses). This is what answer C is about. Answer B is more about a general understanding (e.g. a market research and maybe a gap analysis). It does not explicity include a solution which is clearly desired.
  • Q24: You implied that by "changing mixture between yoghurt and topping", SuperSandwich should increase the topping over yoghurt. That is not stated anywhere. In fact, answer C includes both possible scenarios: It might be beneficial to increase the yoghurt share, although yoghurt prices increased since yoghurt can still be cheaper than the topping. It could also be possible that toppings are now cheaper than yoghurt. In this case you would increase the topping share over the yoghurt. This is clearly stated in the answer sheet which says "Answer D is the best possible measure. Depending on which ingredient is more expensive, SuperSandwich should change the mixture of its yoghurts and use more of the cheaper component".

We hope that this cleared your doubts!

Thanks again for your feedback and for helping us improve our practice material!

Best,

Astrid

PrepLounge Community Management

PrepLounge Consulting Q&A Forum

Follow us on: Facebook | Instagram | LinkedIn | twitter

Hi there,

We took the time to thoroughly review the PST and here is our feedback to each point you have made:

  • Q3: B is the correct answer since it explains clearly and without any extra assumptions why profits are different. Altough C and D explain revenue differences you would imply a cost assumption (for instance no costs) if you picked them as the correct answer. An answer that includes an implicit assumption (that you cannot clearly prove) cannot be the "best" answer to explain a certain fact.
  • Q6: Very long indeed. The challenge here is about "picking the right battles". A good candidate deprioritizes answering this question and skips it for the moment.
  • Q8: Answer C offers a possible explanation for this observation. However, it does not explain this observation the LEAST. "Only" implies that the current payment options are not as diverse as usual (but we agree that we could have made it more obvious. We will adjust the wording asap). If C would be correct you assumed that other companies have fewer payment options (as you said no credit card for instance). As such a thing is not stated anywhere that is a way "bigger" implicit assumption than assuming that "only" implies less payment options compared to competitors. Interpreting "only" as we did, will offer a good explanation for this observation. Since we are looking for a statement that explains this observation the LEAST, answer C should thus be omitted.
  • Q10: Answer B is correct since - again - it involves less implicit assumptions than the other options do. It is clearly and explicitly stated that the CEO is highly concerned about profit setbacks that will be caused by drawing money from nuclear energy and fossil fuels. Since shutting down a nuclear power plant will exactly do that, this option is clearly not what the CEO is looking for. Although it could (not yet enough data to assess) be a viable option from an outside external perspektive, this question does not refer to an neutral outside-in view, but rather refers to what the CEO is looking for.
  • Q14: Answer B does not need additional assumptions and thus is the correct answer. Building a brand that justifies higher prices implies that energy is not a commodity and prices can be set by a company (and is not set by the market).
  • Q15: You are absolutely right. We will correct that mistaken discount. Thanks for reporting this.
  • Q18: Again, you are right. We will be updating to the correct term "GWh" asap
  • Q19: Answer C is correct since that is what the CEO explicitly stated. She wants to gain a better understanding of the underlying trends that drive the differences of revenues/profits between geographies. Thus she is asking for a financial analysis and a possible solution (meaning fixing profit losses). This is what answer C is about. Answer B is more about a general understanding (e.g. a market research and maybe a gap analysis). It does not explicity include a solution which is clearly desired.
  • Q24: You implied that by "changing mixture between yoghurt and topping", SuperSandwich should increase the topping over yoghurt. That is not stated anywhere. In fact, answer C includes both possible scenarios: It might be beneficial to increase the yoghurt share, although yoghurt prices increased since yoghurt can still be cheaper than the topping. It could also be possible that toppings are now cheaper than yoghurt. In this case you would increase the topping share over the yoghurt. This is clearly stated in the answer sheet which says "Answer D is the best possible measure. Depending on which ingredient is more expensive, SuperSandwich should change the mixture of its yoghurts and use more of the cheaper component".

We hope that this cleared your doubts!

Thanks again for your feedback and for helping us improve our practice material!

Best,

Astrid

PrepLounge Community Management

PrepLounge Consulting Q&A Forum

Follow us on: Facebook | Instagram | LinkedIn | twitter

Hi, thank you for your response. Will go through your answers and my own notes and come back. Regards! — Anonymous A on Aug 18, 2019

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Hi,

Try to copy-paste the questions and maybe we can try to help you :p

Hi,

Try to copy-paste the questions and maybe we can try to help you :p

Hi, thank you, but I am 100% sure you are not allowed to do it since they are protected under copyright by PrepLounge. Perhaps staff can help! — Anonymous A on Jul 27, 2019

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