Multi-Source Reasoning Set 1: Business Options Andrew wants to start a food business.

After careful evaluation of all the options and suggestions from friends, he is considering the following three options: 1. Catering Services 2. Chinese Restaurant 3. Indian Vegetarian Restaurant The catering services business involves preparing and delivering food on order for weddings and other functions. The demand for catering services is highly seasonal. The demand is very high in summer (April to July) and is almost non-existent in December and January. Andrew expects that about 50% of the annual profit will be earned during summer. The demand in all the summer months (April, May, June and July) is about the same. Based on the inputs given by those who are already in this business, it is not possible to estimate annual profits, revenues and costs accurately. The actual values of revenue, cost and profit-before-tax business can vary by upto 50% from the respective estimated values. The other two options are considered fairly safe and the estimates are supposed to be fairly accurate. The revenue, costs and profits can be estimated with an accuracy of 10%. The respective values for revenue, costs and profit-before-tax may be assumed to be the same for all the months. Estimates Andrew consulted several people who are already in the business and also did some independent research and came up with estimates than are as accurate as possible. Catering Services 25,000 72,000 48,000 24,000 Chinese Restaurant 100,000 144,000 96,000 48,000 Indian Vegetarian Restaurant 75,000 132,000 108,000 24,000

Investment Required Annual Revenue Annual Cost Profit Before Tax (PBT) All figures in the above table are in USD.

The catering services business comes under a business category that is exempt from all taxes. For the other two options, a third for the profit should be paid to the government as tax. In case of loss, there is no need to pay any tax.

1. Considering all the three options, what is the lowest monthly profit after tax (PBT less tax payable), that Andrew can have ________

A. 500

B. 1000

C. 1800 D. 1200 E. 367

2. The PBT from catering services in any month will be less than that from the Chinese Restaurant Business (True/False) The profit after tax, from Indian Vegetarian Restaurant business in any month will be less than that from the Chinese restaurant business (True/False) Actual annual profit before tax as a percentage of the estimated revenue is the highest for catering services (True/False)

3. Costs can be classified into two types fixed costs and variable costs. While fixed costs do not change with revenue, variable costs are directly proportional to the revenue. For each of the three options, the 'Annual Cost' mentioned in the table comprises an equal proportion of fixed costs and variable costs. What will be the percentage increase in estimated profit after tax from Indian Vegetarian Restaurant business, if estimate of the fixed costs is reduced by 8% ? A. 8% B. 18% C. 25% D. 10% E. 36%

4. Return on Investment (ROI) is annual profit after tax as a percentage of investment. The minimum ROI from catering services is what percentage less than the maximum ROI from Chinese Restaurant Business. A. 1% Set 2: Categories of Health Insurance Claims All the health insurance claims can be broadly classified into four types: 1. Claims for Treatment of Respiratory Diseases 2. Claims for Treatment of Cancer 3. Claims for Heart diseases 4. Claims for treatments of injuries from accidents The chances of suffering from any of the three categories of diseases and accidents vary with age and gender. Children and infants (0-12 years) have negligible chance of heart diseases. Statistics show that children are very unlikely to suffer from accidents and that chance can also be neglected for all practical purposes. They have very high chance of respiratory diseases. Historically one out of every 20 children gets treatment for respiratory diseases every year. The chance of they undergoing cancer treatment in any year is about 2%. B. 5% C. 10% D.15% E. 0%

Elderly Men (Aged above 60 years): The group suffers primarily from cardiac related issues and chances they undergoing treatment for cardiac related problems in any year is as high as 6%. They also have about 3% chance of suffering from respiratory diseases. The chances of suffering from cancer and accidents for this segment is very low and is negligible. Young and Middle aged Woman (20-60 Years) have 4% chance of cancer. Among the cancer cases reported from this segment, almost half are cases of breast cancer. They dont generally suffer from heart diseases, respiratory problems or accidents. Teenage Boys (13-19 Years) suffer from accidents as they lead a very active life and are involved in activities like rash driving and play contact sports like football and rugby. Statistics show that about 8% of the people in this segment get treatment for accident related injuries every year. The chances of each of the other three types of claims for this segment is about 1%. Chance of suffering from any ailment with-in a segment can be ignored, unless specified. Insurance Products Available in the Market The health insurance market is dominated by five companies - IseeI, Power health (PH), Sun health (SH), Alfa insurance (AI) and Universal health (UH).

The above chart gives the premium quoted by the five companies for the 4 different age groups. All the companies pay the medical expenses completely. Expected profit from a policy is annual premium less expected total health expense. Average Expenses for each of the claims. The following table gives the average expenses for treatment of each of the diseases or injures from accidents, which do not vary with age and gender. Treatment Type Respiratory Diseases Cancer Heart diseases Injuries from Average Treatment Cost 10,000 50,000 50,000 25,000

accidents Expected expense for any policy holder for any ailment is product of average treatment cost and his/her chance of suffering from that ailment. Total expected health expense is sum of expected expenses of all the ailments. For any insured person, all the medical expenses incurred on account of the four ailments will be completely provided for by his/her insurance company. A customer will seek insurance if and only if he/she can obtain a policy whose annual premium is less than twice of that of his/her annual expected total medical expense. If there is more than one policy that satisfies the aforementioned criterion, he will choose the one that charges the lowest premium. 5) The expected profit is the highest for which of the following policies? A. Alfa Insurance policy for a 61 year-old male B. Sun health insurance policy for a 10 year-old female C. United health insurance policy for 40 year-old female D. Power health insurance policy for a 65 year-old male E. IseeI insurance policy for an 18 year-old male. 6) Mr. John Smith, a 65 year old male, is interested in purchasing health insurance. Given his family history, he believes that his chances of suffering from any ailment is about 50% more than that of the average of the segment in which he comes under. If Alfa insurance intends to make Mr. John it customer, it must offer a discount of at least _____ on the quoted price to make him buy its policy. A. 1% B. 10% C. 20% D. 25% E. 33.3% 7) For each of the below statements, select TRUE, if the statement can be shown to be true from the information given. Otherwise Choose False: A. Among the five companies, the average premium charged per customer is lowest for United Health (True/ False) B. A 40 year old woman will always choose Alfa Insurance (AI) over the other four options (True/ False) C. The category of elderly people (those above 60 years of age) gives the highest expected profit per policy for each of the five companies. (True/ False) 8) The standard deviation (SD) of prices offered by 5 companies is highest for ____________ age group.

A. 0-12 B. 13-19 C. 20-60 D. Above 60