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June 2013 Q1 GYM Bunnies

Forums › ACCA Forums › ACCA PM Performance Management Forums › June 2013 Q1 GYM Bunnies

  • This topic has 1 reply, 2 voices, and was last updated 11 years ago by Daniel.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • May 27, 2014 at 10:30 pm #171313
    Lilit
    Member
    • Topics: 8
    • Replies: 11
    • ☆

    Dear Sir, Good evening!
    Asking for your kind assistance.
    I am reviewing this question, and I am confused with part B.
    The examiner answered the requirement for calculation the maximum price the GB should pay for perfect information about expansion’s exact effect of Membership numbers.
    The answer is.
    If memeberhip numbers were 6000:
    EV-3.42m*3=10.26
    Less costs of 360k=9.9m

    In this instance, GB would choose option 1(3*3.36)=10.08m
    Why $10.08 is chosen?

    If membership numbers were 6500:
    EV=3.705*3=11.115m
    Less costs of 360k=10.755m

    In this case, GB will choose option 2

    So, if membership numbers are 6000, of which there is a 0.4probability, EV will be 10.08(option1) and if membership numbers are 6500, of which there is a 0.6probability, then EV will be 10.755m(option2)

    Therefore, the EV with PERFECT INFO=(0.4*10.08)+(0.6*10.755)=10.485.

    I do not understand why EV $10.08 is selected for 6000 members, and not 9.9, calculated. as
    EV-3.42m*3=10.26
    Less costs of 360k=9.9m.
    Thank you very much!

    May 31, 2014 at 3:02 pm #172126
    Daniel
    Member
    • Topics: 4
    • Replies: 21
    • ☆

    Because if you knew you would only get 6000 members if you expanded you wouldn’t bother, you would stick to no expansion as the ev of that (10.08) is higher than 9.09.

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