Why do you take the 12000$ and 600$?

Question

Hey everyone,

Why do you take the 12000$ and 600$? In the text it is only mentioned that the is "able" to spend these amounts, but willing to spend less. Why do you then assume that he spends 100% of what he is able to do?

Answer 1

I agree with Denis.

Importantly, for every case we have to be clear about the objective, the maximization criteria (client goals or 2nd objective in a sense), and the constraints.

Here, we have:

Objective/Maximization Criteria: "To earn enough money with the “investment” section of the cellar in order to subsidize whatever I consume in the “drinking” section over time"

Constraint: "I'm obviously constrained by several things: the amount of money I am able to spend, the amount of wine I can (or want to) drink, the space available for the cellar"

Answer 2

I only took a brief look, but I understand it the following way.

2 parts of the basement - consumption / investment.

2 money-spending patterns: 1,500$ kick-start for consumption / 12,000$ for investment, HOWEVER every month after that $300 for consumption and $600 for investment.

So the $12,000 and $600 are intended for investment. Why would you not max this out given the returns you expect?

Answer 3

Hello!

TBH, agreed with you. This is why you are always encouraged to ask clarifying questions to the interviewer, who would point you i the right direction.

Hope it helps!

Cheers,

Clara

Answer 4

Given that the investment strategy is to hold each bottle of wine for exactly 5 years before selling, they will not s... (ganze Antwort lesen)

Given that the investment strategy is to hold each bottle of wine for exactly 5 years before selling, they will not sell everything in the inventory immediately at year 5. If w... (ganze Antwort lesen)