Using sensitivity analysis make a business decision.

VENUS Communications has compiled the following data about its operations.

Source of revenue 1: Consulting services to other telecom companies

20,000 hours of consultations per year.

$275 Per hour charged for consulting

Source of Revenue 2:Wholesale of VOIP Usage per Minute

400,000,000 Minutes of VOIP Sold per year.

$0.02 Charged per Minute

Source of Revenue 3:Extra space in Building leased to other companies

100,000 Sq Ft of space Leased (You have 200,000 sq ft and are leasing half, using the other half)

$45 Charged per Sq Ft per Year

Costs are as follows:

$1,000,000 Per Year (Management Salaries)

$0.003 Per minute (Cost of VOIP network Maintenance)

$13.50 Per Sq Ft (Cost of maintaining the leased premises)

$150 Per hour per Telecom Consultant

As the new CEO of the company, you want to increase the Net Revenue of the company by at least 20%.

You have the following options to improve the performance of the business:

OPTION 1 - Increase consulting business volume by 20%

OPTION 2 - Increase the VOIP wholesale volume by 25%

OPTION 3 - Increase your office leased space by 30%

What is your decision?

What are the sensitivity numbers/ratios for each Option?

Prioritize which actions will have more impact on your NET revenue.

To perform sensitivity analysis, we follow these steps:

1. Define the base case of the model.2. Calculate the output variable for a new input variable, leaving all other assumptions unchanged.3. Calculate the sensitivity by dividing the % change in the output variable over the % change in the input variable