a. Percentage of customers trying the brand = 35%; of these, 40% will buy in the future.

Thus, (0.35)(0.4) = 0.14 or 14% of the market will purchase the product in the long run.
In addition, if the customer base will buy 15% more than the average buyer, then the long run market share will b

b. Let T = proportion of customers trying the brand, R = proportion of customers who repurchase, and B = buyer in

ng run market share will be 0.14(1.15) = 0.161, or 16.1%.

purchase, and B = buyer index (which is 1.0 for the average). Then the long run market share is T R B.

NI
C
I
GS
TI
TT
TR

National Income
Consumption
Investment
Government Spending
Total Income of Individuals
Total Income Taxes Paid
Tax Rate

NI = k_1 * C + k_2 * I + k_3 * GS

C = k_4 * TI + k_5 * TT
I = k_6 * TI
TT = k_7 * TI * TR

Consumption

Total Income

National
Income

onsumption

Investment

Total Taxes

otal Income

Tax Rate

Government
Spending

Same as an earlier problem: Problem 1.10

Expected Crowd
Average Concessions Expenditure $

3000 people
15.00 per person

Fixed Cost $ 10,000.00

Ticket Price $

10.00 per person

REVENUE FROM TICKETS $ 30,000.00

CONCESSION SALES $ 45,000.00
PROFIT PERCENTAGE

80%

BAND PROFIT $ 50,000.00

A
B

$
$

PRICE
20.00
35.00

A
B

$
$

PRICE
25.00
50.00

Model Parameters
20.00
(0.62)
29.00
0.10

0.30
(0.60)

QTY SOLD
18.10
10.00

Model Parameters
20.00
(0.62)
29.00
0.10

0.30
(0.60)

QTY SOLD
19.50
1.50

REVENUE
$
362.00
$
350.00

$
$

REVENUE
487.50
75.00

TOTAL REV
$
712.00

TOTAL REV
562.50

Increase Per Year

7%
Year

Sales Volume
1
2
3

NPV

Selling Price
100,000 $
107,000 $
114,490 $

$1,483,430.23

$0.50
Unit Var Cost
10.00 $
10.50 $
11.00 $

5%

3.00
3.15
3.31
7%

10%
Fixed Cost
$
$
$

200,000.00
220,000.00
242,000.00

Discount Rate

Total Rev
Total Costs
Total Profit
$
1,000,000.00 $
500,000.00 $
500,000.00
$
1,123,500.00 $
557,050.00 $
566,450.00
$
1,259,390.00 $
620,675.68 $
638,714.33

Number of Calls

500

Investment Percentage
Number of Investments

15%
75

Unqualified Percentage
Number of Qualitifed Investors

60%
30

Group 1
Group 2
Group 3
Group 4

50%
25%
15%
10%

Group 1
Group 2
Group 3
Group 4

Number of Investors
15
7.5
4.5
3

BROKER'S COMMISSION $

2,531.25

invest
invest
invest
invest
Fixed Cost
$
$
$
$

60.00
60.00
85.00
135.00

Broker's Keep %

50%

Commission Schedule
$
$
$
$

5,000.00
20,000.00
50,000.00
100,000.00

Variable %
0.50%
0.50%
0.40%
0.30%

Lower Limit
$
$
25,001.00
$
50,001.00
Commission Per Group
$
85.00
$
160.00
$
285.00
$
435.00
$
5,062.50 TOTAL COMMISSION

Upper Limit
$
25,000.00
$
50,000.00
$
100,000.00

Commission Schedule
Fixed
$
$
$

Variable %
60.00
85.00
135.00

0.50%
0.40%
0.30%

Gift Level
Benefactor
Philantropist
Producer's Circle
Director's Circle
Principal
Soloist
Solicitations
TOTAL DONATIONS $

Amount
10000
5000
1000
500
100
50
1000 calls
91,000.00

2
5
20
35
5% of solicitations
7% of solicitations

Number of copies
Purchase Cost $
Sales Price $

15 purchased
2.25
5.00

Demand

12

Number Sold
Number Left Over

12
3

Total Cost $
Total Revenue $

33.75
60.00

Total Profit $

26.25

5
6
7
8
9
10
11
12
13
14
15

$
$
$
$
$
$
$
$
$
$
$
$

26.25
(8.75)
(3.75)
1.25
6.25
11.25
16.25
21.25
26.25
31.25
36.25
41.25

Appointments Taken
Demand
No Show Rate

175 patients per week

140
15%

Capacity

125 patients per week

Pre-screen Revenue $

300.00

Overbooking Cost $

125.00

SCHEDULED
SHOW UP
PRE-SCREENED
OVERBOOKED
REVENUES $
COSTS $
NET REVENUE $

140
119
119
0
35,700.00
35,700.00

x
1
1.5
2
2.5
3
3.5
4
4.5
5
5.5
6
6.5
250.0
7
200.0
7.5
150.08
8.5
100.0
9
50.0
9.5
10
0.0
10.5 0
-50.0
-100.0
-150.0

y
-102.8
-36.4
-4.7
-17.0
-5.3
-4.2
-1.5
-0.2
0.0
0.1
0.8
3.4
9.1
9.5
3
2
22.5y = 1.0409x - 16.196x + 84.749x - 144.73
54.9
103.8
142.0
25.2
193.22
4
6
8
10

x vs y

y
Poly. (y)
12

10
10.5
11
11.5
12
12.5
13
13.5
14
14.5
15
15.5
18.00
16
16.00
16.5
14.00
17
12.00
17.5
10.00 18
8.0018.5
6.00 19
4.0019.5
2.00 20
0.00
0

y
16.04
13.46
13.46
11.70
13.36
11.74
10.63
11.05
11.35
10.04
11.14
11.04
11.31
10.56
10.89
9.00
8.18
8.71
7.41 3 + 1.5036x2 - 22.443x + 123.28
y = -0.0338x
7.62
5.13

x
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

x vs y

120.00
100.00
80.00
y
Poly. (y)

60.00
40.00

3.45
4.39
6.22
7.58
9.62
8.25
6.96
11.20
12.74
16.26
15.12
29.33
35.78
44.23
34.53
62.13
54.54
62.02
110.62

x vs y

20.00
0.00

10

15

20

25

10

x vs y

y = 3.0438e0.176x
y
Expon. (y)

10

15

20

PRICE DEMAND
$ 12.00
2080
$ 14.00
2006
$ 16.00
1950
$ 18.00
1870

2100

2050

2000

1950

1900

1850
$-

$2.00

$4.00

DEMAND

y = -34.3x + 2491
R = 0.9959

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

$20.00

DEMAND MODEL
D = 2000 - 3P

Price
Demand

COST MODEL
C = 5000 + 4D = 5000 + 4 x ( 2000 - 3P) = 13000 - 12P

Total Cost
Total Revenue

TOTAL REVENUE
TR = D x P = ( 2000 - 3P) x P = 2000P - 3 P^2
TOTAL COST
TC = 13000 - 12P
TOTAL PROFIT
TP = TR - TC
= 2000P - 3 P^2 - (13000 - 12P)
= -13,000 + 2012 P - 3 P^2

Total Profit

500.00
500

7,000.00

250,000.00

243,000.00

100
150
200
250
300
350
400
450
500

$ 243,000.00
$ 158,200.00
$ 221,300.00
$ 269,400.00
$ 302,500.00
$ 320,600.00
$ 323,700.00 <---- BEST PRICE IS AROUND THIS VALUE
$ 311,800.00
$ 284,900.00
$ 243,000.00

$
$

P
600.00
300.00

Revenue

D
500
1200

=PxD
= P x (-2.333 P + 1900 )
= -2.333 P^2 + 1900 P

Price vs Demand
1400
1200
1000
800

Price
Demand
Revenue

250.00
1,317
$ 329,168.75

D = -2.333 P + 1900

600
400
200
0
0

$
$
$
$
$
$
$
$
$
$
$
$

250.00
275.00
300.00
325.00
350.00
375.00
400.00
425.00
450.00
475.00
500.00

329,169
329,168.75
346,044.19
360,003.00
371,045.19
379,170.75
384,379.69
386,672.00 <--- In this neighborhood
386,047.69
382,506.75
376,049.19
366,675.00

100

200

300

Price vs Demand

2.333 P + 1900

300

400

500

600

700

Markdown Pricing Model

Scenarios Ten/ten
Days at full retail price
10
Intermediate markdown
10%

Data
Retail price
Inventory
Selling season (days)
Days at full retail
Intermediate markdown
Clearance markdown
Demand function
a
b

$70.00
1000
50
40
40%
70%
91
1.2

Model
Full Retail Sales
Retail price
Daily sales
Days at retail price
Units sold at retail

$70.00
7.00
40
280
Retail revenue $19,600.00

Discount Sales
Discount
Discount price
Daily sales
Unit sold
Clearance Sales
Clearance price
Units sold at clearance

40%
$42.00
40.60
406
Discount revenue $17,052.00
$21.00
314
Clearance revenue

$6,594.00

Total revenue $43,246.00

$43,246.00
15%
20%
25%
30%
35%
40%
45%
50%

Twenty/twenty
Thirty/thirty Forty/forty
20
30
40
20%
30%
40%

$
$
$
$
$
$
$
$

20.00
50,498
52,850
54,320
51,940
48,930
45,920
42,910
39,900

$
$
$
$
$
$
$
$

25.00
48,440
50,400
51,625
52,115
49,788
46,900
44,013
41,125

$
$
$
$
$
$
$
$

30.00
46,382
47,950
48,930
49,322
49,126
47,880
45,115
42,350

$
$
$
$
$
$
$
$

35.00
44,324
45,500
46,235
46,529
46,382
45,794
44,765
43,295

$
$
$
$
$
$
$
$

40.00
42,266
43,050
43,540
43,736
43,638
43,246
42,560
41,580

Weekly Price $

900.00

Operating Costs $ 25,000.00

Number of Rooms

40 rented

TOTAL REVENUE $ 36,000.00

PROFIT $ 11,000.00

32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50

$ 11,000.00
$ 3,800.00
$ 4,700.00
$ 5,600.00
$ 6,500.00
$ 7,400.00
$ 8,300.00
$ 9,200.00
$ 10,100.00
$ 11,000.00
$ 11,900.00
$ 12,800.00
$ 13,700.00
$ 14,600.00
$ 15,500.00
$ 16,400.00
$ 17,300.00
$ 18,200.00
$ 19,100.00
$ 20,000.00

Appointments Taken
Demand
No Show Rate

175 patients per week

140
15%

Capacity

125 patients per week

Pre-screen Revenue $

300.00

Overbooking Cost $

125.00

SCHEDULED
SHOW UP
PRE-SCREENED
OVERBOOKED

140
119
119
0

REVENUES $ 35,700.00
COSTS $
NET REVENUE $ 35,700.00

$ 35,700.00
100
110
120
130
140
150
160
170
180
190
Demand
200

$
$
$
$
$
$
$
$
$
$
$

100
25,500
25,500
25,500
25,500
25,500
25,500
25,500
25,500
25,500
25,500
25,500

$
$
$
$
$
$
$
$
$
$
$

110
25,500
28,200
28,200
28,200
28,200
28,200
28,200
28,200
28,200
28,200
28,200

$
$
$
$
$
$
$
$
$
$
$

120
25,500
28,200
30,600
30,600
30,600
30,600
30,600
30,600
30,600
30,600
30,600

$
$
$
$
$
$
$
$
$
$
$

130
25,500
28,200
30,600
33,300
33,300
33,300
33,300
33,300
33,300
33,300
33,300

$
$
$
$
$
$
$
$
$
$
$

Appointments Accepted
140
150
25,500 $
25,500 $
28,200 $
28,200 $
30,600 $
30,600 $
33,300 $
33,300 $
35,700 $
35,700 $
35,700 $
37,125 $
35,700 $
37,125 $
35,700 $
37,125 $
35,700 $
37,125 $
35,700 $
37,125 $
35,700 $
37,125 $

160
25,500
28,200
30,600
33,300
35,700
37,125
36,125
36,125
36,125
36,125
36,125

$
$
$
$
$
$
$
$
$
$
$

170
25,500
28,200
30,600
33,300
35,700
37,125
36,125
35,000
35,000
35,000
35,000

$
$
$
$
$
$
$
$
$
$
$

180
25,500
28,200
30,600
33,300
35,700
37,125
36,125
35,000
34,000
34,000
34,000

$
$
$
$
$
$
$
$
$
$
$

190
25,500
28,200
30,600
33,300
35,700
37,125
36,125
35,000
34,000
32,875
32,875

$
$
$
$
$
$
$
$
$
$
$

200
25,500
28,200
30,600
33,300
35,700
37,125
36,125
35,000
34,000
32,875
31,875

Number of Calls

500

Investment Percentage
Number of Investments

15%
75

Unqualified Percentage
Number of Qualitifed Investors

60%
30

Group 1
Group 2
Group 3
Group 4

50%
25%
15%
10%
Number of Investors

Group 1
Group 2
Group 3
Group 4

BROKER'S COMMISSION $

15
7.5
4.5
3

2,531.25

Broker's Keep %

invest
invest
invest
invest

$
$
$
$

5,000.00
20,000.00
50,000.00
100,000.00

Fixed Cost Variable %

$ 60.00
$ 60.00
$ 85.00
$ 135.00

0.50%
0.50%
0.40%
0.30%

50%
Calls Made

Commission Schedule
Lower Limit
Upper Limit
Fixed
Variable %
$
$ 25,000.00 $
60.00
0.50%
$ 25,001.00 $ 50,000.00 $
85.00
0.40%
$ 50,001.00 $ 100,000.00 $
135.00
0.30%
Commission Per Group
$
85.00
$ 160.00
$ 285.00
$ 435.00
$ 5,062.50 TOTAL COMMISSION

100
200
300
400
500
600
700
800
900
1000

$ 2,531.25
$ 506.25
$ 1,012.50
$ 1,518.75
$ 2,025.00
$ 2,531.25
$ 3,037.50
$ 3,543.75
$ 4,050.00
$ 4,556.25
$ 5,062.50

Gift Level
Benefactor
Philantropist
Producer's Circle
Director's Circle
Principal
Soloist
Solicitations
TOTAL DONATIONS $

Amount
10000
5000
1000
500
100
50
1000 calls
91,000.00

2
5
20
35
5% of solicitations
7% of solicitations

250
500
750
1000
1250
1500
1750
2000
2250

$ 91,000.00
$ 84,625.00
$ 86,750.00
$ 88,875.00
$ 91,000.00
$ 93,125.00
$ 95,250.00
$ 97,375.00
$ 99,500.00
$ 101,625.00

Expected Crowd
Average Concessions Expenditure $

3000 people
15.00 per person

Fixed Cost $ 10,000.00

Ticket Price $

10.00 per person

REVENUE FROM TICKETS $ 30,000.00

CONCESSION SALES $ 45,000.00
PROFIT PERCENTAGE

Scenario Summary

80%

BAND PROFIT $ 50,000.00

Changing Cells:
$C$2
$C$4
$C$6
Result Cells:
$C$15
Notes: Current Values column repres
time Scenario Summary Report was cr
scenario are highlighted in gray.

Current Values:

Optimistic

Pessimistic

3000
$
15.00 $
$ 10,000.00 $

4500
2500
16.00 $
12.50
9,000.00 $ 12,000.00

$ 50,000.00 $ 84,600.00 $ 33,000.00

rrent Values column represents values of changing cells at
ario Summary Report was created. Changing cells for each
re highlighted in gray.

New Store Financial Model

Data
Store Size (square feet)
Total Fixed Assets
Depreciation period (straight line)
Discount Rate
Tax Rate
Inflation Rate
Cost of Merchandise (% of sales)

5,000
300,000
5
10%
34%
2%
30%

Operating Expenses
Labor Cost $
Rent Per Square Foot $
Other Expenses $
First Year Sales Revenue

200,000
28
325,000
800,000
Year 2

Annual Growth Rate of Sales

Year 3
20%

12%

Model
Year
Sales Revenue
Cost of Merchandise
Operating Expenses

$
$

Labor Cost
Rent Per Square Foot
Other Expenses
Net Operating Income
Depreciation Expense
Net Income Before Tax
Income Tax
Net After Tax Income
Plus Depreciation Expense
Annual Cash Flow
Discounted Cash Flow
Cumulative Discounted Cash Flow

$
$
$
$
$
$
$
$
$
$

1
800,000
240,000
200,000
140,000
325,000
(105,000)
60,000
(165,000)
(56,100)
(108,900)
60,000
(48,900)
(44,454.55)
(44,454.55)

$
$
$
$
$
$
$
$
$
$
$
$

2
960,000
288,000
204,000
142,800
331,500
(6,300)
60,000
(66,300)
(22,542)
(43,758)
60,000
16,242
13,423.14
(31,031.40)

3
$ 1,075,200
$
322,560
$
$
$
$
$
$
$
$
$
$

208,080
145,656
338,130
60,774
60,000
774
263
511
60,000
60,511
45,462.69
14,431.28

Scenario Summary
Current Values:

Year 4

Year 5
9%

5%

4
$ 1,171,968
$
351,590

5
$ 1,230,566
$
369,170

$
$
$
$
$
$
$
$
$
$

$
$
$
$
$
$
$
$
$
$

212,242
148,569
344,893
114,674
60,000
54,674
18,589
36,085
60,000
96,085
65,627.36
80,058.65

216,486
151,541
351,790
141,579
60,000
81,579
27,737
53,842
60,000
113,842
70,687.05
150,745.70

SC 1

SC 2

Changing Cells:
$B$10
2%
1%
5%
$B$11
30%
25%
30%
$B$14
$
200,000 $ 150,000 $ 225,000
$B$16
$
325,000 $ 300,000 $ 350,000
$B$18
$
800,000 $ 600,000 $ 600,000
$D$20
20%
15%
22%
$E$20
12%
10%
15%
$F$20
9%
6%
11%
$G$20
5%
3%
5%
Result Cells:
$G$38
150,745.70 (64,523.16) (481,345.64)
Notes: Current Values column represents values of changing cells at
time Scenario Summary Report was created. Changing cells for each
scenario are highlighted in gray.

SC 3

$
$
$

3%
26%
200,000
325,000
800,000
25%
18%
14%
8%

401,733.89

Collection %
Var Cost %
Growth Rates

Year 1
Year 2
Year 3
NPV

35%
12%
8%

3%

Patients Served
Average Billing
Collected Amount
1,500.00 $
150,000 $
52,500
1,620.00 $
154,500 $
54,075
1,749.60 $
159,135 $
55,697
$95,366,563.52

7%

Scenario Summary
Current Values:

Changing Cells:
$D$2
$D$3
$C$5

35%
12%
8%

Result Cells:
$C$12
$95,366,563.52
Notes: Current Values column represents values of changing cells at
time Scenario Summary Report was created. Changing cells for each
scenario are highlighted in gray.

6%

$
$
$

Variable Costs
18,000 $
18,540 $
19,096 $

Fixed Costs
20,000,000
21,200,000
22,472,000

Discount Rate

Worst Case

Best Case

15%
20%
1%

50%
6%
12%

($86,226,979.19)
f changing cells at
ging cells for each

$244,269,344.86

TOTAL COLLECTED
TOTAL COSTS
TOTAL PROFIT
$
78,750,000 $
47,000,000 $
31,750,000
$
87,601,500 $
51,234,800 $
36,366,700
$
97,447,909 $
55,882,712 $
41,565,197

Expected Crowd
Average Concessions Expenditure $

3000 people
15.00 per person

Fixed Cost $ 10,000.00

Ticket Price $

10.00 per person

REVENUE FROM TICKETS $ 30,000.00

CONCESSION SALES $ 45,000.00
PROFIT PERCENTAGE

80%

BAND PROFIT $ 50,000.00

Increase Per Year

7%
Year

Sales Volume
1
2
3

NPV

Selling Price
100,000 $
107,000 $
114,490 $

$1,483,430.23

$0.50
Unit Var Cost
10.00 $
10.50 $
11.00 $

5%

3.00
3.15
3.31
7%

10%
Fixed Cost
$
$
$

200,000.00
220,000.00
242,000.00

Discount Rate

Total Rev
Total Costs
Total Profit
$
1,000,000.00 $
500,000.00 $
500,000.00
$
1,123,500.00 $
557,050.00 $
566,450.00
$
1,259,390.00 $
620,675.68 $
638,714.33

Number of Offers
Acceptance %
Scholarship Amount
Accepted
Available
Extra Funds Needed

40 students
70%

<---- Needs to be decided, a one-way table might be useful

<---- If this is not certain, than a two-way table should be consid

$ 25,000.00 per student

28 scholarships
20 scholarships
$ 200,000.00

-way table might be useful

two-way table should be considered