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

McKinsey PST Problem:

Hi all,

I have a question from the sample McK PST they have on their website. I don't quite understand their explanation, so I decided to ask it here.

If total Innovation Capital in Exhibit 1 (now at 13.8) were to grow by 5% per year in the future, which of the following would be the MINIMUM required annual growth in Human Capital (now at 3.3) that would see it represent more than half of total Innovation Capital in 10 years?

A: 10% B: 15% C: 20% D: 25%

NOTE: Innovation Captial is comprised of three different kinds of 'Capital' and the question is concerned with Human Capital.

How does one calculate this? Thanks

Hi all,

I have a question from the sample McK PST they have on their website. I don't quite understand their explanation, so I decided to ask it here.

If total Innovation Capital in Exhibit 1 (now at 13.8) were to grow by 5% per year in the future, which of the following would be the MINIMUM required annual growth in Human Capital (now at 3.3) that would see it represent more than half of total Innovation Capital in 10 years?

A: 10% B: 15% C: 20% D: 25%

NOTE: Innovation Captial is comprised of three different kinds of 'Capital' and the question is concerned with Human Capital.

How does one calculate this? Thanks

1 answer

  • Upvotes
  • Date ascending
  • Date descending
Best Answer

Hey Paul,

first, you need to compute the value of innovation capital in 5 years: 13.8 * 1.05 ^ 5 = 17.6 (it's always about adding 5% each year 5 times)

then you need to try to check what are the potential values of human capital in 5 years time for the different options. Then lower percentage one that still allows you to reach a value which is higher than 8.8 (half of 17.6) is the right choice (you need to test the several options, as a tip i would start by trying out option b - in trial questions is better to start by middle options)

best

Bruno

Hey Paul,

first, you need to compute the value of innovation capital in 5 years: 13.8 * 1.05 ^ 5 = 17.6 (it's always about adding 5% each year 5 times)

then you need to try to check what are the potential values of human capital in 5 years time for the different options. Then lower percentage one that still allows you to reach a value which is higher than 8.8 (half of 17.6) is the right choice (you need to test the several options, as a tip i would start by trying out option b - in trial questions is better to start by middle options)

best

Bruno

A few questions actually. How do you do 13.8 * 1.05^5 ? Do you do this for each year? 13.8 * 1.05 = 14.49 * 1.05 = 15.21 * 1.05 = 15.97? And so on? This seems very time consuming, even for the PST. Doing this for 10 years would be even more time consuming. And I also don't really understand the second part of the explanation, can you please rephrase it? — Paul on Jan 15, 2018 (edited)

Paul, there are two shortcuts that might help you in some of these problems (but I don't believe any of them would be particular useful in this particular example). First, for small annual growth rate values and short period of times, you can get a ballpark estimate by linearly multiplying the growth rate by the number of years (in this case 5 * 5% = 25%, which will give 13.8 * 1.25 = 17.25; quite near the absolute value of 17.6). Second, you could use the rule of 72, which tells you that a number will take 72/growth rate to double up (at a 5% growth rate, the initial number will double in approximately 14.4 years). — Anonymous on Jan 15, 2018 (edited)

Regarding the second part of the explanation, you will need to do an iterative process of elimination. 3.3 * 1.15 ^5 = 6.63, so less than half of the other type of capital (17.6). Repeat the same for 20% and still less, so it will only work for 25% (3.3 * 1.25 ^5 = 10.08). In this case, using the proxy method I described before would give you a wrong answer, because the numbers are all very similar — Anonymous on Jan 15, 2018

I understand how to answer this question. Essentially you calculate the growth of Innovation Capital over 10 years at a 5% interest rate, and then see how much Human capital needs to grow to comprise 50% of that found figure. I guess my problem is that calculation 1.05*1.05*1.05.... ten times, seems so time consuming. And if shortcuts don't really work, how else to approach it? — Paul on Feb 26, 2018

How 1.05 came — Jithin on Sep 23, 2018

Related BootCamp article(s)

Interviewer-Led vs Candidate-Led cases

Case Interviews can be led by the candidate or by the interviewer: In Candidate-led cases the main challenge is the structure. In Interviewer-led cases the main challenge is to adapt quickly

How to Read Charts and Data in Case Interviews

We explain and give tips on how to understand and analyze graphs, charts and data presented by interviewer to candidates in case interviews.

Quiz

Written tests such as the PSTs

Top tier consulting firms have started using PSTs to test for in-depth analytical skills needed to be successful as a consultant on a day-to-day basis.

Which companies are currently using written tests ?

All major firms like McKinsey, BCG and Bain use tests to assess a candidate's analytical skills. However the design of those tests can differ a lot.

Related case(s)

McKinsey Questions

Solved 37.4k times
McKinsey Questions Tell me of a situation where you had an opinion and no one seemed to agree with you. What was your goal when you decided to join university / work / clubs / a sports team? Did you have a goal that you were not able to reach? What did you do? What do you want to be remembered for and how are you achieving it? What is your typical way of dealing with conflict?
4.5 5 858
| Rating: (4.5 / 5.0) |
Difficulty: Intermediate | Style: Fit interview | Topics: Personal fit

Tell me of a situation where you had an opinion and no one seemed to agree with you. What was your goal when you decided to join university / work / clubs / a sports team? Did you have a goal that you were not able to reach? What did you do? What do you want to be remembered for and how are you ... Open whole case

MBB Final Round Case - Smart Education

Solved 7.1k times
MBB Final Round Case - Smart Education Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvantaged areas. The client is considering starting operations for its services in the Chicago area. They hired us to understand if that makes sense. Due to the nonprofit regulation, SmartBridge should operate on its own in the market, without any partnership. How would you help our client?
4.6 5 298
| Rating: (4.6 / 5.0)

Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvant ... Open whole case

Motivational questions – FIT interview preparation

Solved 1.7k times
Motivational questions – FIT interview preparation During this exercise, we will deep-dive in 4 of the most common Motivational questions asked in FIT interviews:   Why Consulting? Why this particular company? (McKinsey, Bain, BCG, others) Why this particular location? *Particularly relevant to people re-locating or choosing an office not in their region Why this particular specialized business function *Only relevant when not applying for a general role (e.g., McKinsey Advanced Analytics, BCG Gamma, etc.) *box-open green* *See Graph 1 – Note: "Motivational" are one of the 4 types of questions you can find in FIT interviews. *box-close* ➥ Graphs from the Integrated FIT Guide for MBB
4.5 5 49
| Rating: (4.5 / 5.0)
Difficulty: Intermediate | Style: Fit interview | Topics: Personal fit

During this exercise, we will deep-dive in 4 of the most common Motivational questions asked in FIT interviews: Why Consulting? Why this particular company? (McKinsey, Bain, BCG, others) Why this particular location? *Particularly relevant to people re-locating or choosing an office not ... Open whole case

Introduction and CV questions – FIT interview preparation

Solved 1.4k times
Introduction and CV questions – FIT interview preparation During this exercise, we will deep-dive in 3 of the most common Intro & CV questions asked in FIT interviews:  1. Walk me through your CV 2. Tell me about yourself 3. Tell me about the thing that makes you most proud on your CV   *box-open green* *See Graph 1 – Note: "Intro & CV questions" are one of the 4 types of questions you can find in FIT interviews. *box-close* ➥ Graphs from the Integrated FIT Guide for MBB    
4.5 5 53
| Rating: (4.5 / 5.0)
Difficulty: Intermediate | Style: Fit interview | Topics: Personal fit

During this exercise, we will deep-dive in 3 of the most common Intro & CV questions asked in FIT interviews: 1. Walk me through your CV 2. Tell me about yourself 3. Tell me about the thing that makes you most proud on your CV *See Graph 1 – Note: "Intro & CV questions" are one of the 4 ty ... Open whole case