Capital One Interview Question: Anti-freeze: planning to buy ... | Glassdoor

Interview Question

Senior Business Analyst Interview Richmond, VA

Anti-freeze: planning to buy a company with 12.5 in cash

 , 10% bonds for the remaining amount. Total worth of the company $137.5. assuming there is no discount rate. When will u break-even. And is it a good buy? Part(2) - Anti-freeze is currently priced at $8, with 60% market share; there are other products in the market(A) priced at $7 with 15% market share, (B) at $7 with 7% market share and (c) with $5 and 10% market share. Should we consider decreasing our price by $1 or NOT?
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Interview Answer

3 Answers

1

Hi, do you mind post the answer as well? Appreciate it.

Sandy on Dec 12, 2011
0

What are we breaking even with ? The 12.5 cash investment ? How much cash flow does the new product generate ?

Ben on Dec 17, 2011
0

breakeven: you paid 12.5 today, and 137.5 in future, and no interest rate, so you have to make 150 to break-even.
pricing: have to have cost and volume, and historical data of price elasticity. If not, use breakeven analysis. assuming total market volume remains as price drops, and that this price elasticity takes into consideration of all factors including dynamics of market share rebalance and volume change to this company only, set price elasticity to be x, cost to be c, total volume to be V, we have (8-c)*0.6V = (7-c)*0.6V*(1-x/8), x=(c-7)/8, if absolute value of price volatility is larger than this, we decrease price.

Anonymous on Feb 12, 2014

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