1 Without discounting cash flows to take into account the time value of money, how soon will...
Question:
1
Without discounting cash flows to take into account the time value of money, how soon will MBC break even on the following customers? In all cases, assume that revenues and variable costs to staff the cages occur on an ongoing basis but that the acquisition costs are a one-time event.
a). little leaguers
b). summer sluggers
c). elite ballplayers (print ad)
d). elite ballplayers (party)
e). entertainment seekers
Question 2
Taking into account the time value of money and assuming that 100 percent of a customer will have experienced attrition once the net present value of annual profits per customer falls below Y100, what is the lifetime value to MBC of the following customers? Assume that a customer's lifetime extends up to and including the year in which the net present value of annual profits falls below Y100.
a). little leaguer
b). summer slugger
c). elite ballplayer (print ad)
d). elite ballplayer (party) i. should MBC throw the gala event?
e). entertainment seeker
Little Leaguers | Summer Sluggers | Elite Ballplayers (Print Ad) | Elite Ballplayers (Party) | Entertainment Seekers | |
Contact Cost | ¥1,000 | ¥1,500 | ¥300 | ¥12,500 | ¥50 |
Response Rate | 10.0% | 15.0% | 0.5% | 25.0% | 2.5% |
Acquisition Cost | 10,000 | 10,000 | 60,000 | 50,000 | 2,000 |
Workers Needed | 2 | 1 | 1 | 1 | 2 |
Worker Labor Cost | ¥1,500 | ¥1,500 | ¥1,500 | ¥1,500 | ¥1,500 |
Instructors Needed | 1 | 0 | 1 | 1 | 0 |
Instructor Hourly Labor Cost | ¥3,000 | N/A | ¥4,500 | ¥4,500 | N/A |
Total Cost Per Hour | 6,000 | 1,500 | 6,000 | 6,000 | 3,000 |
Hourly Price Charged | ¥6,500 | ¥3,000 | ¥7,500 | ¥7,500 | ¥4,000 |
Hourly Margin ¥ | 500 | 1,500 | 1,500 | 1,500 | 1,000 |
Hourly Margin % | 8% | 100% | 25% | 25% | 33% |
Annual Hours | 10.0 | 4.0 | 20.0 | 20.0 | 1.5 |
Annual Margin ¥ | 5,000 | 6,000 | 30,000 | 30,000 | 1,500 |
Retention Rate | 75.0% | 50.0% | 60.0% | 60.0% | 35.0% |
Interest Rate | 10.0% |
Financial Accounting A User Perspective
ISBN: 978-0470676608
6th Canadian Edition
Authors: Robert E Hoskin, Maureen R Fizzell, Donald C Cherry