# Help! Case from Wharton 2017 Casebook

Case book Case Interview casing consulting help Wharton
New answer on Aug 20, 2020
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The case is about a highway concessions company wanting to enter an international market. The client is currently deciding between entering the market through an acquisition or through a primary investment.

I'm having trouble with where the different inputs have been derived from.

1. (1 - operating expenses)? Why is there a 1 -, can someone explain to me how this would tell us the profit?

2. How the candidate got km x \$/km x vehicles to calculate the revenues (?) of the investment. How do highway concessions even work?

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Hi there,

It would be much easier to help if we had context!

However, for #1 it seems they have provided you opex in a % format. In which case, for every \$ earned you have to spend x % in opex...this is the remaining operating profit (common term for looking at the profitability of a company)

You really need to study accounting 101!

For #2, again, case context would help, but it sounds like this highway company specifically charges per the km. So, they know when you enter the tollway, and when you exit, and calculate the fee you're charged. As such, it would make perfect sense to say "all the money will make will be based off how many cars enter the toolway and the average distance they drive"

This is not how all highway concessions work and is an important clarifying question at the beginning of the case.

Hi,

I don't have the case, but based on the info provided:

1. Opex are given as % of revenues (e.g., opex = 60% of revenues), thus km*\$/km* vehicles are the revenues, and multiplying it by 1-opex (which is the percentage of revenues - 100% - minus the percentage of costs, meaning the percentage of revenues that is profit), gives you the profit

2. km*\$/km* vehicles are exactly the concession company revenues. Basically, when you use the highway, you pay an amount that depends (mainly) on the kilometers of the highway you "used" at that is true for all cars, trucks, and motorcycles (with different fares per vehicle). This happens every time a vehicle enters the highway. This is not true for all countries (e.g., in Switzerland you pay an annual tax regardless of the kilometers or the time you use the highway), but for most of them it is. Probably in this case, they wanted to simply the revenues (which of course depends also on where you entered and where you exit from the highway + other revenue streams, like concessions for additional services, like drive-in, restaurants, oil stations, and so on) as a revenue per kilometer per vehicle.

Hope this helps!

Best,

Giulia