Business Finance Homework Help

Complete

• Chapter 11 #1, 2, 3
• Chapter 12 #3, 4
• Word Problems below

• Based on last week’s “That’s Entertainment” website, now create a 5 Bucket Gains Chart (which was extra credit earlier).
• Lifetime Value Problem

You are the marketing director for Amazon. You just brought Whole Foods Market. As a way to increase retention, you inform Amazon credit card holders that you will double their reward points for every purchase they make at Whole Foods for the next four years. Your job is to do a sensitivity analysis to see LTV of customers based on the following information. Your time period is 1 year for Team 1 and 3 years for Team 2. Interpret your results. Hint: Take a look how Exhibit 12.6 in the book is set up for the variables and their relationships.

You can assume the multiplier in the discount rate formula to be 2

Team 1:

• You are testing in NYC. You have identified 36,400 customers
• Retention falls off 50% after each year
• Expense is equal to 36% of revenue
• Monthly revenue is $125 per customer
• Yearly inflation is projected at 2%
• You are testing in Omaha Nebraska. You have identified 12,300 customers
• Retention is 65% for the first year, then falls off an additional 10 points for the next three years.
• Expense is equal to 25% of revenue
• Monthly revenue is $95per customer
• Yearly inflation is projected at 2.5%

Team 2