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# Rental Cost reduction

MBB Final Round Case - Smart Education
New answer on Jul 09, 2020
2.0 k Views

Why the rental cost reduction should be 10*6 and 20*6? Where the "20" comes from?

• New cost = Investment*Percentage to be paid by client – Savings in months 0-6 – Savings in months 6-12
• New cost = 2.000*0,7 – 10*6 – 20*6 = 1.400k – 60k – 120k = \$1.220k

• Date ascending
• Date descending

Hi Mavis,

Thanks for solving my case.

10K and 20K refer to the monthly savings in the first 6 months and in the second 6 months respectively.

Indeed:

• Current Monthly Rent = 72k (from Exhibit 4)

• New Monthly Rent in month 0-6 = 62k (from Exhibit 5)
• New Monthly Rent in month 6-12 = 52k (from Exhibit 5)

Thus the difference is 10K in the first 6 months and 20k in the second 6 months, for each month.

As a consequence:

• Savings in months 0-6 = 10K*6
• Savings in months 6-12 = 20K*6

I will update the case solution to make it more clear and I will add the K symbol in the first part of the equation, as I noticed it is now missing.

Best,

Francesco

(edited)

Hi Francesco, thanks very much. But why savings in month 6-12 should be 20K*6 instead of 10k*6? Thanks again.

Hi Mavis, since the current rent is 72K and the new one in month 6-12 would be 52K, the difference each month would be 20K. Thus in the 6-month period you get a saving of 20K*6. Hope this helps!

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