Question
2. Given the following information: Cost of acquiring customer: $5 Monthly profit margin from customer: $1.5 Annual retention rate: 70 percent Costs and revenues grow
2. Given the following information:
Cost of acquiring customer: $5
Monthly profit margin from customer: $1.5
Annual retention rate: 70 percent
Costs and revenues grow at 2.5 percent annually
Discount profits at 10 percent per year
Tax rate: 38 percent
Assume the profit during the month is based on the ending number of customers and the market value of
January 2021 is $8 billion. In the file AmazonData.xlsx, t = 1 is March 1997 and so on. For example,
through the end of September 1997, there are 6.34 million people had tried Amazon.com.
For each month you might have the following columns:
Month
N(t) = Total number of customers who have tried Amazon.com by end of month t
Quits = Number of customers leaving Amazon.com during each month
Ending customers
New customers
Profit margin
Acquisition costs
After-tax profits
Use this information to get a value of Amazon.com as of January 2021. Run 420 total months (35 years)
and determine whether you believe that at the beginning of January 2021 Amazon.com was fairly valued.
Show all the steps and your analysis.
millions
Month
N(t)
1
1.398341
2
1.811179
3
2.342581
4
3.021814
5
3.886169
6
4.978562
7
6.347205
8
8.043401
9
10.11743
10
12.61209
11
15.55404
12
18.94375
13
22.74627
14
26.88598
15
31.24824
16
35.68989
17
40.05697
18
44.2055
19
48.01953
20
51.42192
21
54.37642
22
56.8826
23
58.96658
24
60.67101
25
62.04625
26
63.14379
27
64.01209
28
64.5
29
65
30
65.5
31
66
32
66.5
33
67
34
67.5
35
68
36
68.5
37
69
38
69.5
39
70
40
70.5
41
71
42
71.5
43
72
44
72.5
45
73
46
73.5
47
74
48
74.5
49
75
50
75.5
51
76
52
76.5
53
77
54
77.5
55
78
56
78.5
57
79
58
79.5
59
80
60
80.5
61
81
62
81.5
63
82
64
82.5
65
83
66
83.5
67
84
68
84.5
69
85
70
85.5
71
86
72
86.5
73
87
74
87.5
75
88
76
88.5
77
89
78
89.5
79
90
80
90.5
81
91
82
91.5
83
92
84
92.5
85
93
86
93.5
87
94
88
94.5
89
95
90
95.5
91
96
92
96.5
93
97
94
97.5
95
98
96
98.5
97
99
98
99.5
99
100
100
100.5
101
101
102
101.5
103
102
104
102.5
105
103
106
103.5
107
104
108
104.5
109
105
110
105.5
111
106
112
106.5
113
107
114
107.5
115
108
116
108.5
117
109
118
109.5
119
110
120
110.5
121
111
122
111.5
123
112
124
112.5
125
113
126
113.5
127
114
128
114.5
129
115
130
115.5
131
116
132
116.5
133
117
134
117.5
135
118
136
118.5
137
119
138
119.5
139
120
140
120.5
141
121
142
121.5
143
122
144
122.5
145
123
146
123.5
147
124
148
124.5
149
125
150
125.5
151
126
152
126.5
153
127
154
127.5
155
128
156
128.5
157
129
158
129.5
159
130
160
130.5
161
131
162
131.5
163
132
164
132.5
165
133
166
133.5
167
134
168
134.5
169
135
170
135.5
171
136
172
136.5
173
137
174
137.5
175
138
176
138.5
177
139
178
139.5
179
140
180
140.5
181
141
182
141.5
183
142
184
142.5
185
143
186
143.5
187
144
188
144.5
189
145
190
145.5
191
146
192
146.5
193
147
194
147.5
195
148
196
148.5
197
149
198
149.5
199
150
200
150.5
201
151
202
151.5
203
152
204
152.5
205
153
206
153.5
207
154
208
154.5
209
155
210
155.5
211
156
212
156.5
213
157
214
157.5
215
158
216
158.5
217
159
218
159.5
219
160
220
160.5
221
161
222
161.5
223
162
224
162.5
225
163
226
163.5
227
164
228
164.5
229
165
230
165.5
231
166
232
166.5
233
167
234
167.5
235
168
236
168.5
237
169
238
169.5
239
170
240
170.5
241
171
242
171.5
243
172
244
172.5
245
173
246
173.5
247
174
248
174.5
249
175
250
175.5
251
176
252
176.5
253
177
254
177.5
255
178
256
178.5
257
179
258
179.5
259
180
260
180.5
261
181
262
181.5
263
182
264
182.5
265
183
266
183.5
267
184
268
184.5
269
185
270
185.5
271
186
272
186.5
273
187
274
187.5
275
188
276
188.5
277
189
278
189.5
279
190
280
190.5
281
191
282
191.5
283
192
284
192.5
285
193
286
193.5
287
194
288
194.5
289
195
290
195.5
291
196
292
196.5
293
197
294
197.5
295
198
296
198.5
297
199
298
199.5
299
200
300
200.5
301
201
302
201.5
303
202
304
202.5
305
203
306
203.5
307
204
308
204.5
309
205
310
205.5
311
206
312
206.5
313
207
314
207.5
315
208
316
208.5
317
209
318
209.5
319
210
320
210.5
321
211
322
211.5
323
212
324
212.5
325
213
326
213.5
327
214
328
214.5
329
215
330
215.5
331
216
332
216.5
333
217
334
217.5
335
218
336
218.5
337
219
338
219.5
339
220
340
220.5
341
221
342
221.5
343
222
344
222.5
345
223
346
223.5
347
224
348
224.5
349
225
350
225.5
351
226
352
226.5
353
227
354
227.5
355
228
356
228.5
357
229
358
229.5
359
230
360
230.5
361
231
362
231.5
363
232
364
232.5
365
233
366
233.5
367
234
368
234.5
369
235
370
235.5
371
236
372
236.5
373
237
374
237.5
375
238
376
238.5
377
239
378
239.5
379
240
380
240.5
381
241
382
241.5
383
242
384
242.5
385
243
386
243.5
387
244
388
244.5
389
245
390
245.5
391
246
392
246.5
393
247
394
247.5
395
248
396
248.5
397
249
398
249.5
399
250
400
250.5
401
251
402
251.5
403
252
404
252.5
405
253
406
253.5
407
254
408
254.5
409
255
410
255.5
411
256
412
256.5
413
257
414
257.5
415
258
416
258.5
417
259
418
259.5
419
260
420
260.5
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E Marketing
Authors: Judy Strauss, Raymond Frost
7th edition
132953447, 978-1315506517, 1315506513, 978-0132953443
