Cookie and Privacy Settings

This website uses cookies to enable essential functions like the user login and sessions. We also use cookies and third-party tools to improve your surfing experience on preplounge.com. You can choose to activate only essential cookies or all cookies. You can always change your preference in the cookie and privacy settings. This link can also be found in the footer of the site. If you need more information, please visit our privacy policy.

Data processing in the USA: By clicking on "I accept", you also consent, in accordance with article 49 paragraph 1 sentence 1 lit. GDPR, to your data being processed in the USA (by Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Manage settings individually I accept
1

Estimation question: How much would you pay for the Golden bridge?

Any help please?

I do not have any approach in mind to solve it.

I would highly appreciate it if your approach could be specific to this question and not to a general valuation question.

Please note as well that no information was provided by the interviewer so you need to take all the assumptions.

Any help please?

I do not have any approach in mind to solve it.

I would highly appreciate it if your approach could be specific to this question and not to a general valuation question.

Please note as well that no information was provided by the interviewer so you need to take all the assumptions.

(edited)

1 answer

  • Upvotes
  • Date ascending
  • Date descending
Best Answer

I would approach this as a strategic invesment decision as follows:

The maximum price I would pay for the bridge = Incremental yearly profit generated by the bridge x the break even period you have as a target (in years)

I would disaggregate the profits into it's drivers:

- revenue would be mapped to the money you generate from the toll on the bridge, which can be mapped to the number of cars crossing the bridge each day.

- costs woule be mapped to maintenance, upkeeep and repairs etc

I would size the market to generate revenue (assuming we know the toll price) and ask for data on costs. Given the calculated profit generation - you multiply by the target break even period in years and this is the maximum price you should pay to meet your target (e.g. if you want to break even on the investment in 5 years and the bridge will generate $50M per year in profits, the maximum price you should then pay is $250M).

Hope this helps! :)

I would approach this as a strategic invesment decision as follows:

The maximum price I would pay for the bridge = Incremental yearly profit generated by the bridge x the break even period you have as a target (in years)

I would disaggregate the profits into it's drivers:

- revenue would be mapped to the money you generate from the toll on the bridge, which can be mapped to the number of cars crossing the bridge each day.

- costs woule be mapped to maintenance, upkeeep and repairs etc

I would size the market to generate revenue (assuming we know the toll price) and ask for data on costs. Given the calculated profit generation - you multiply by the target break even period in years and this is the maximum price you should pay to meet your target (e.g. if you want to break even on the investment in 5 years and the bridge will generate $50M per year in profits, the maximum price you should then pay is $250M).

Hope this helps! :)

Related case(s)

Essen für die Schüler?

Solved 4.9k times
Essen für die Schüler? Ein Restaurantinhaber überlegt sich, Schulen mit Essen zu beliefern. Für seine Überlegungen würde er gerne wissen, wie viel Geld er verdienen würde, wenn er 1% der Schulkantinen-Mittagessen in Deutschland verkauft?
4.5 5 249
| Rating: (4.5 / 5.0)

Ein Restaurantinhaber überlegt sich, Schulen mit Essen zu beliefern. Für seine Überlegungen würde er gerne wissen, wie viel Geld er verdienen würde, wenn er 1% der Schulkantinen-Mittagessen in Deutschland verkauft? Open whole case

Grain Co-operative – Brand Launch

Solved 1.2k times
Grain Co-operative – Brand Launch MeGrain is a co-operative of 5000 farmers in the central part of India. As a co-operative, the farmers came together to sell the grains to retailers and wholesalers. They are the 3rd  largest grain sellers in India and sell 10million quintals of grains annually. They have operations in 4 regions in India, and head office in Mumbai.  MeGrain mainly deals in 3 types of grains. Viz. Rice, Wheat, and Maze. The grains are collected from the farmers attached to the co-operative. The grains are sorted, packed, and stored at storage facilities spread across towns in the region. MeGrain sales team brings orders by visiting retailers and wholesalers across the country and abroad. The grains are dispatched directly from the storage facilities to the customers. Customers make the payment to the MeGrain co-operative, which then is forwarded to the bank accounts of the individual farmers. MeGrain management has observed that the FMCG market, including foodgrains, is changing rapidly in India. Mom and pop stores have given ways to supermarkets. Consumers are adopting branded products rapidly. Although there is no branded grain product yet, the management believes that there is a huge scope for a branded product in the grain market as well. Management is contemplating about launching a MeGrain branded grains in the Indian market. They have called you to advise them whether they should launch their own brand in the Indian market.
4.4 5 34
| Rating: (4.4 / 5.0)

MeGrain is a co-operative of 5000 farmers in the central part of India. As a co-operative, the farmers came together to sell the grains to retailers and wholesalers. They are the 3rd largest grain sellers in India and sell 10million quintals of grains annually. They have operations in 4 regions in ... Open whole case

Cats in the Berlin Olympic Stadium

Solved 300+ times
Cats in the Berlin Olympic Stadium An American marketing company plans to fill the Olympic Stadium in Berlin with cats for an advertising event and now hires your consulting company to find out how many animals they would need for this.
3.7 5 3
| Rating: (3.7 / 5.0)

An American marketing company plans to fill the Olympic Stadium in Berlin with cats for an advertising event and now hires your consulting company to find out how many animals they would need for this. Open whole case