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Medium Merger & Acquisition

Lola Lo’s Zoo

#Media & Entertainment
ProHub Comment

This is a quantitative-heavy investment decision case centered on net present value analysis. The case tests the candidate's ability to structure a framework around breakeven analysis, calculate annual cash flows, and determine a maximum purchase price using NPV calculations with a perpetuity component. The 29-year revenue stream (50-year lifespan minus 21-year current age) provides the time horizon for discounting.

Estimated Time 26 minutes
Difficulty Medium
Source Chicago Booth
10 / 100

Our client, Lola Lo, owns and runs a zoo in a major metropolitan area within the United States. There has been a recent discovery of a dinosaur on a small island in the South Pacific. This is the only dinosaur in the world. Lola Lo would like to investigate if purchasing the dinosaur is a good project.

Specifically, please help our client with the following questions:

  1. How would you determine if purchasing the dinosaur is a good project?
  2. If it is, how would you determine the purchase price for the dinosaur?

Clarifying Information

  1. The dinosaur is the size of an elephant.
  2. The dinosaur can easily be transported from the South Pacific to the United States.
  3. The dinosaur cannot reproduce.
  4. The dinosaur is not violent, but cannot interact with non-trained individuals.
  5. The zoo has enough land to house the dinosaur and construct an exhibit area without reconfiguring the existing park.
  6. Current Age: 21 years
  7. Expected Lifespan of Dinosaur: 50 years
  8. Revenues (annual): Tickets: $2,000,000; Hotels Accommodations: $1,000,000; Movie & Entertainment Licensing: $500,000; Food in the Park: $500,000; Merchandise: $250,000; Research: $250,000
  9. Fixed Costs (one-time): Exhibit Area and Housing Area: $15,000,000
  10. Variable Costs (annual): Staff to Serve the Dinosaur: $1,000,000; Food & Merchandise Sales: $250,000; Operations: $250,000
  11. Discount rate = 10%
Mock Interview
Interviewer

Our client, Lola Lo, owns and runs a zoo in a major metropolitan area within the United States. There has been a recent discovery of a dinosaur on a small island in the South Pacific. This is the only dinosaur in the world. Lola Lo would like to investigate if purchasing the dinosaur is a good project. Specifically, please help our client with the following questions: 1. How would you determine if purchasing the dinosaur is a good project? 2. If it is, how would you determine the purchase price for the dinosaur?

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

Lola Lo Zoo is considering purchasing a rare dinosaur discovered in the South Pacific. The candidate must determine if this is a good investment and, if so, calculate the maximum purchase price. Using net present value analysis with annual revenues of $4.5M and costs of $1.5M, the breakeven purchase price is $13.125M. The dinosaur will generate $3M in annual profit over its remaining 29-year lifespan.

Key Insights:

  1. NPV framework is essential—the candidate must recognize this as an investment decision where positive NPV drives the purchase decision
  2. Breakeven analysis is the primary consideration: calculate annual operating profit ($3M) and discount it over the dinosaur’s remaining lifespan (29 years) at 10% discount rate
  3. Maximum purchase price calculation requires understanding perpetuity formula and the rule of 72 for hand calculations without a calculator
  4. The case-specific brainstorm on exhibit design evaluates feasibility and risk, reinforcing that financial analysis alone is insufficient—operational and safety considerations are critical
  5. Time horizon is explicit (29 years of revenue) because the dinosaur will eventually die, making this a finite cash flow problem, not perpetual
  6. Revenue recognition requires specificity: distinguishing between incremental ticket revenue versus existing zoo visitors helps avoid double-counting