🧭 PS4 Question Interpretation

Note that for any multiple choice question, there is only one correct answer. Make sure to read the question carefully and actively look for questions to ask. In general, I can’t adjust the grading on these questions.

Never hesitate to ask me interpretation questions like the ones below. I am always happy to help!

Question 5

”The price of raw materials” is a squishy macro variable that affects all firms. The actual analysis will start with a spreadsheet involving assumptions about the critical variables for the firm: cost of manufacturing the knives, selling price of the knives, and the number of knives that will be sold. The analysis will depend on how these critical variables change simultaneously. (all 3 of them)

Question 7

🙋‍♀️ Might the break-even point be different at a different location/concept/scale/etc?

✔ No, they have ruled out other options and are only considering whether they should open a franchise near the college. They are Burger Billies and they only have one business model: a small fast-food burger ​chain in the Burger Billies franchise.

Question 8

Read every single option carefully. One is “not correct” and the rest are “correct,” so there is exactly one option you should choose. If you have any doubts, ask me precise questions until you feel comfortable. I’ll be happy to help!

🙋 What is meant by “incorporating, at the start of the​ project, the effect of decisions that will be made at a later date.”

✔ It means that you know at the start of the project which choices you will make later on. For example, at the start of the project, you know whether you will cancel the project later on, or, alternatively, decide to continue the project. You know exactly which path you will take down the “decision tree,” and you incorporate that path into your initial analysis.