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How to calculate ROI without knowing the investment

Pharma R&D
New answer on Feb 04, 2023
2 Answers
1.1 k Views
Anonymous A asked on Feb 03, 2023

Hi everyone, I'm still confused with the calculation of ROI on pregnant women and old women. The chart only shows cash flow, which is the profit - from my understanding. But without knowing the investment, how do you calculate payback time? Can someone help out? Thanks. 

BTW, the video doesn't include the calculation. 

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Ian
Expert
Content Creator
replied on Feb 04, 2023
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi there,

ROI and payback time are two different things…

Remember that in a case you shouldn't do what you think you're supposed to do. You should do that the case/interviewer leads you to.

Here, there is not enough info for ROI, but there is for breakeven. Make sure you understand the different between ROI, Breakeven, NPV, etc.!

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Anonymous A on Feb 04, 2023

Ian, Thanks for the explanation. But I'm still confused - why the payback time is 5 years, not 8 years? My understanding is - the company reached break even point in the years of 8, so the pay back time should be 8 years.

Hagen
Expert
Content Creator
replied on Feb 03, 2023
#1 Bain coach | >95% success rate | interviewer for 8+ years | mentor and coach for 7+ years

Hi there,

I think this is an interesting question that may be relevant for many people. I would be happy to share my thoughts on it:

  • The case study does not ask to calculate the ROI, which cannot be done without knowing the future cashflow, either way.
  • However, in order to compare the options, it is possible to calculate the break-even point by adding up the investment costs (e.g., 31 for pregnant women) and determining when the sum of the cash flows surpasses this amount (e.g., after 5 years with 32 for pregnant women).

If you would like a more detailed discussion on how to best prepare for your upcoming interviews, please don't hesitate to contact me directly.

Best,

Hagen

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Ian

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