How would a bank loan affect the economics of the cellar?

Oliver Wyman case: Setting up a Wine Cellar
New answer on Feb 04, 2020
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Julia
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asked on Jan 26, 2020

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Ian
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replied on Feb 04, 2020
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This doesn't matter! This isn't in the prompt/question.

The interviewer, clearly a Partner (joke), has the $ to build the cellar.

Regardless, the rate at which he/she could obtain the loan is technically the same rate at which he/she could loan out their money.

Therefore, in both situations, your hurdle rate is the opportunity cost (if asked, which it wasn't). Of course, you could probably recommend "Yes, you can do this, but it'd be better to invest it and use THOSE returns to fund your wine"

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Ian

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