Question

BK Books is an online book retailer that also has 10,000 “bricks
and mortar” outlets worldwide. You are a risk-neutral manager
within the Corporate Finance Division and are in dire need of a
new financial analyst. You only interview students from the top
MBA programs in your area. Thanks to your screening
mechanisms and contacts, the students you interview ultimately
differ only with respect to the wage that they are willing to
accept. About 10 percent of acceptable candidates are willing to
accept a salary of $140,000, while 90 percent demand a salary
of $190,000. There are two phases to the interview process that
every interviewee must go through. Phase 1 is the initial onehour
on-campus interview. All candidates interviewed in Phase
1 are also invited to Phase 2 of the interview, which consists of
a five-hour office visit. In all, you spend six hours interviewing
each candidate and value this time at $2,500. In addition, it
costs a total of $8,000 in travel expenses to interview each
candidate. You are very impressed with the first interviewee
completing both phases of BK Books’s interviewing process,
and she has indicated that her reservation salary is $190,000.
Should you make her an offer at that salary or continue the
interviewing process? Explain.

Answer 1

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