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Easy New Investment Analysis Merger & Acquisition

Ferris Wheel

#Media & Entertainment
ProHub Comment

This case tests financial modeling fundamentals through a real-world investment scenario. The candidate must build a revenue model with seasonal variations, apply time-value-of-money concepts (Rule of 72), and work backwards from required ROI to determine maximum bid price—a practical valuation exercise.

Estimated Time 16 minutes
Difficulty Easy
Source ROSS
10 / 100

A friend of mine is super rich and is always looking into interesting investment opportunities. To raise funds for renovation, Ferris Wheel management in Chicago is considering inviting bids from High Net Worth Individuals (HNIs) to let them run the Wheel for a whole year, 7 years later.

As a fan of Chicago and the Wheel, my friend wants to bid on this opportunity and wants to know how to go thinking about this.

Clarifying Information

  1. Desired ROI: 10%
  2. If the bid is won, the friend would be CEO of the company and run the operations
  3. The friend also has some interesting investments in the food and beverage space
  4. No funding limitations
Mock Interview
Interviewer

A friend of mine is super rich and is always looking into interesting investment opportunities. To raise funds for renovation, Ferris Wheel management in Chicago is considering inviting bids from High Net Worth Individuals (HNIs) to let them run the Wheel for a whole year, 7 years later. As a fan of Chicago and the Wheel, my friend wants to bid on this opportunity and wants to know how to go thinking about this.

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
Practicing...
Score coming soon
Practice this case with AI Mock Interview

A high-net-worth individual seeks to bid on a 1-year operating contract for Chicago’s Ferris Wheel, starting 7 years from now. The analysis requires calculating total revenues ($14M from ticket sales and ancillary revenue), subtracting operating costs ($3M), discounting the 7-year future cash flow to present value ($5.5M), and determining the maximum bid ($5M) to achieve a 10% ROI.

Key Insights:

  1. Revenue modeling with seasonal demand variation (Chicago weather impacts), dynamic pricing strategy (weekend premiums), and multiple revenue streams (tickets, F&B, merchandise)
  2. Time-value-of-money discounting using the Rule of 72 to convert future $11M profit to present value of $5.5M over 7 years at 10% discount rate
  3. Inverse valuation logic: working backwards from desired ROI (10%) and NPV to determine maximum acceptable bid price ($5M bid implies 10% return on $5.5M present value)
  4. Risk considerations including market volatility over 7-year horizon, operational inexperience, opportunity cost of alternative investments, and need for adequate liquidity