Is there perhaps a contradictory statement in the answer?

Oliver Wyman case: Setting up a Wine Cellar
Anonymous A asked on Mar 19, 2020

Hi,

one thing that is puzzling me is that while answering Q1 it is assumer that after year 5 192 bottles are sold (i.e 120 kick-start + 72 bought in y1).

Yet, when in the answer for Q2 it states that after year 5 120 bottles are sold - with the 72 from y1 being sold in y6 (this was also my logical intuition)

Am I missing out on something?

2
on Mar 21, 2020
Last Activity
2
Answers
667
Views
on Mar 21, 2020
Last Activity

Overview of answers

Upvotes
  • Upvotes
  • Date ascending
  • Date descending
Best answer

Hi,

Agree the case is not fully clear on that,

The correct way to look at it is the following:

- Consider that exactly after 5 years you can only sell the kick-start.

- You will then sell six bottles every month for the following 12 months up to the first day of year 6.

If you look at the plot, the increase from year 5 to year 6 is almost 15 k which is consistent with:

Kick-off ($30.000) + 72 bottles (18.000) - costs (13.200) =14.800

Hope you find this helpful,

please don't hesitate to contact me in case you have any doubt,

Thanks,

Ale

Was this answer helpful? 5

Dear anonymous,

You are right, the solution is not really clear. I have tried to explain how to interpret the timelines in the following answer, that could be useful : https://www.preplounge.com/en/consulting-forum/how-do-we-know-that-the-revenue-generated-is-not-reinvested-6221

I will repost here the part that is significant for your question:

  • Assume that you buy the kick-start at time 0
  • Assume that you buy and sell the investments bottles during the whole year. It means that, on average, you can consider the bottles acquired at June of the first year (0.5), June of the second year (1.5) ecc.
  • At the end of the 5 years you have: kick-start bottles + 5 * yearly bottles + drinking bottles =120 + 5 * 72 + 50 = 530
  • At the end of year 6 you have: bottles year 5 + new bottles - sold bottles = 530 + 72 - 192 = bottles at year 5 - 120
  • Analyzing the cashflow, at the end of year 5, you have: 120 bottles ready to be sold and 72 bottles of 4.5 years that you can not sell and that will be sell at 5.5 years

Does it make sense?

Best,
Luca

(edited)

Was this answer helpful? 0
Alessandro gave the best answer

Alessandro

CoachingPlus Expert
McKinsey & Company | McKinsey Coaching teams | INSEAD coach | 20+ candidates (100% success rate)
16
Meetings
41
Q&A Upvotes
0
Awards
6 Reviews