1

Without discounting cash flows to take into account the time value of money, how soon will MBC break even on the following customers? In all cases, assume that revenues and variable costs to staff the cages occur on an ongoing basis but that the acquisition costs are a one-time event.

a). little leaguers

b). summer sluggers

c). elite ballplayers (print ad)

d). elite ballplayers (party)

e). entertainment seekers

Question 2

Taking into account the time value of money and assuming that 100 percent of a customer will have experienced attrition once the net present value of annual profits per customer falls below Y100, what is the lifetime value to MBC of the following customers? Assume that a customer's lifetime extends up to and including the year in which the net present value of annual profits falls below Y100.

a). little leaguer

b). summer slugger

c). elite ballplayer (print ad)

d). elite ballplayer (party) i. should MBC throw the gala event?

e). entertainment seeker

Little Leaguers	Summer Sluggers	Elite Ballplayers (Print Ad)	Elite Ballplayers (Party)	Entertainment Seekers
Contact Cost	¥1,000	¥1,500	¥300	¥12,500	¥50
Response Rate	10.0%	15.0%	0.5%	25.0%	2.5%
Acquisition Cost	10,000	10,000	60,000	50,000	2,000
Workers Needed	2	1	1	1	2
Worker Labor Cost	¥1,500	¥1,500	¥1,500	¥1,500	¥1,500
Instructors Needed	1	0	1	1	0
Instructor Hourly Labor Cost	¥3,000	N/A	¥4,500	¥4,500	N/A
Total Cost Per Hour	6,000	1,500	6,000	6,000	3,000
Hourly Price Charged	¥6,500	¥3,000	¥7,500	¥7,500	¥4,000
Hourly Margin ¥	500	1,500	1,500	1,500	1,000
Hourly Margin %	8%	100%	25%	25%	33%
Annual Hours	10.0	4.0	20.0	20.0	1.5
Annual Margin ¥	5,000	6,000	30,000	30,000	1,500
Retention Rate	75.0%	50.0%	60.0%	60.0%	35.0%
Interest Rate	10.0%