Business Case Studies & Business Publications

Carly's Car Clinic

Schill, Michael J.

Case

Carly's Car Clinic

Schill, Michael J.

F-2007 | Published February 3, 2022 | 3 pages Case

Collection: Darden School of Business

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This short fictional case considers an investment decision in a new business concept, Carly’s Car Clinic. The investment choice entails two similar stores with correlated outcomes and an option to sequence the opening of one after the other. Student analysis highlights the value of the optionality to delay the opening of one of the stores and then not make the subsequent investment if the outcome on the first one is poor. An instructor should anticipate about 30 to 40 minutes of a class session to discuss this case. At the Darden School, the case is taught in the second-year elective "Managerial Finance," but it is suitable for any module covering more advanced topics in capital budgeting, such as optionality. The teaching note provides suggestions for how to pair the case.

1) To introduce and motivate the concept of optionality value in real investment decisions. 2) To showcase the drivers of option values and consider what features contribute to the magnitude of option values