Bucket, a paint wholesaler, is considering selling paint to professional painters. Six hundred professional painters in the
Question:
Bucket, a paint wholesaler, is considering selling paint to professional painters. Six hundred professional painters in the area spend a total of $23 million per year on paint. Average gross margin for Bucket is 35%, and it currently has $4.2 million of sales in this segment. The current retention rate of each painter is 80%, and the revenue per painter is stable over time. (Assume a 10% discount rate.) The marketing director proposes spending $1,000,000 for a one-time direct marketing campaign to professional painters. How many painters would Bucket need to acquire to make this investment profitable in the long term (assume an infinite horizon)?
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta