HEMAM RANJIT KUMAR SINGHFounder & Director| TechSure Global Consultancy LLPGuwahati, Assam, India
William John Abraham is the owner of the Football Team titled “North-Eastern Dynamic United, NEDU” for the forth-coming Football Tournament of Indian Super-Duper League, 2014 #ISDL. Some ten teams are participating in this tournament, where Indian high profile industrialists, Celebrities are joining hands together for making it a Grand success, thus owning the respective teams of their choices. John has got the following information at this nascent stage of Team formation:
I. Case- A: An investment of INR 100 Million with a blend of hired Foreign and local players has the possibility to fetch him a 65% strong demand of INR 180 Million and a 35% weak demand of INR 60 Million
II. Case– B: An investment of INR 85 Million with all locality available players from North-Eastern India has the possibility to fetch him a 65% strong demand of INR 110 Million and a 35% weak demand of INR 48 Million
After the Expected monetary value analysis, what option should John choose for finalizing his team?
A. Case - A with an investment of INR 100 Million
B. Case – B with an investment of INR 85 Million
C. John should not invest on this tournament as he does not have the knowledge of Football
D. None of the above
(Please note: Self - prepared question and earlier posted in Linkedin Forum. Posted for discussion purposes only)
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Amit JainProgram Manager| BarclaysPune, Maharastra, India
He should go with Option A. The Expected monetary value for this case is 38M and for Case B it is 3.3M Saving Changes...
saurabh mahajanPMP, ITIL, PRINCE2| vodafonePune, Maharashtra, India
A
with 65% chance to make 80% profit Saving Changes...
Datta RajuFunctional Consultant| TATA CONSULATANCY LIMITEDPune, Maharashtra, India
Option-A has more benefits Saving Changes...
Hannes KropfProject Manager| ITERGO GmbHHamburg, Hamburg, Germany
Option A) might be correct. Calculation of the EMV comes to:
EMV = 0.65 x 100 Mio INR + 0.35 x 60 Mio INR = 138 Mio INR
and 138 Mio INR (Output) - 100 Mio INR (Input) = 38 Mio INR or 38% interest, which is a good interest rate but we have to compare with Option B)
Option B) might be correct. Calculation of the EMV comes to:
EMV = 0.65 x 110 Mio INR + 0.35 x 48 Mio INR = 88.3 Mio INR
and 88.3 Mio INR (Output) - 85 Mio INR (Input) = 3.8 Mio INR or 3.8% interest.
Thus the outcome of Option A) is ten times higher than Option B)
Option C) might be correct, since John might have no knowledge of football, but he has knowledge of the EMVA. Thus he calculates the Values of both options and sees, which investment is the best one.
Option D) is not correct, because the calculation of the EMV comes to a distinct result of choosing Case B)
Option A) is the correct answer. Saving Changes...
HEMAM RANJIT KUMAR SINGHFounder & Director| TechSure Global Consultancy LLPGuwahati, Assam, India
Nice explanations from all. Thank you friends. Yes , the Correct answer Option is Option # A. Case - A with an investment of INR 100 Million
Justification :
For Case - A : EMV = 0.65*(180 - 100 ) + 0.35*(60-100) Million
= 0.65*80 - 0.35*40
= 38 Million Indian Rupees
For Case - B : EMV = 0.65*(110 - 85) + 0.35*(48 - 85) Million
= 0.65*25 - 0.35*37
= 3.30 Million Indian Rupees
So , Bigger EMV i.e., INR 38 Million should be chosen
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