How do you compute expected return for two projects?
Company: Capital One
Role: Data Scientist
Category: Statistics & Math
Difficulty: easy
Interview Round: Technical Screen
## Case: Choose between two TV projects under uncertainty
You are evaluating two projects:
- **Project A: "Analyst"** (an existing TV show you can continue investing in)
- **Project B: "Shark Bank"** (a new project)
### Part A — Expected return
For each project you are given (or can request) a set of possible outcomes (e.g., success, moderate success, failure) and their associated profits/cash flows.
1. What information must you ask for to compute **expected return** (especially for "Shark Bank")?
2. How do you compute and compare the **expected return** (or NPV) of the two projects?
3. After computing, which project would you pick and why?
### Part B — Selling decision with numbers
Assume the remaining economic life of **"Analyst"** is **2 years**.
- If you sell the "Analyst" project today, you expect to **lose 1.5 million subscribers**.
- Each lost subscriber corresponds to **$32 USD** of contribution (assume this is the total contribution you would have earned per subscriber over the relevant horizon; state any alternative assumption if you choose).
- "Shark Bank" will generate **$22M total profit in 2 years** (assume this is already net of costs).
A competitor offers you **$51M** today to buy the "Analyst" project.
1. Show how you would decide whether to sell, using an **NPV/expected value** framework.
2. Besides the numeric comparison, list key strategic considerations that could change the decision.
**Deliverable:** Provide formulas, a clear decision rule, and key assumptions (probabilities, discount rate, risk).
Quick Answer: This question evaluates a candidate's ability to compute expected return and net present value by modeling probabilistic outcomes, cash flows, discounting, and decision criteria for comparing an existing asset versus a new project.
