Clarification for CAPEX to roll out fibre cost

Question

Hi,

For calculating Capex to roll out the fibre cost, why 250 HH were considered and not 125? The information mentioned that 50% of the HH subscribe for the broadband - in that case, shouldn't the Capex be - $1000 * (125 HH * 0.5 km per HH) = $ 62500??

Thanks in advance for clarifying this question. :)

Best regards,

Kirti

Answer 1

Hello Kirti,
When computing the investment cost you need to consider the cost associated to “creating the network” for all the HH. In this industry, you build the network first and then let customer connect to your network.
A good way a deciding if you should do the calculation on all the HH or only the half of them is to answer the question: will I now exactly whom those households are (before starting this project)? - in this case no so the company ill have to create a network that allows all HH to connect

Cheers,

Armine

Answer 2

Hi Kirti,

Just to add to Armine's great response, this is a great example as to why it's important to a) Have a good general understanding of key industries and b) Know when to clarify/confirm assumptions and ask information when we don't know the industry!

Try practicing building up industry knowledge within a case. As in, “what do I not know that I need to confirm/clarify”. There's no hard in asking the interviewer more about the industry as long as you do it in the right way!