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Customers increasingly want a Wi-Fi hotspot in their vehicles. Such a hotspot provides both drivers and passengers with the ultimate in accessible performance dashboards,

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Customers increasingly want a Wi-Fi hotspot in their vehicles. Such a hotspot provides both drivers and passengers with the ultimate in accessible performance dashboards, entertainment and safety features. The Wi-fi providers are thrilled about these new developments, as new customers mean increased returns on their investments. It also means increased investments to keep assets upgraded and functional because of increased demand. Consider start-up service provider MOBILE HOTSPOT. It is considering a variety of pricing options. To provide this service, the company incurs a variable cost of $5 per month per customer as well as monthly fixed costs of $250,000 to operate per service area. Plan options Selling price A B 20 25 15 CS ( If MOBILE HOTSPOT's newly invested assets in a given service region are $10,000,000, how many customers need to per plan option per year in order for the company to achieve its target ROI of 15%? b. If MOBILE HOTSPOT determines it selling price of $20 per month (for the average customer) based on a markup on its variable costs, what is that markup percentage? c. After performing market research, MOBILE HOTSPOT has determined that it is most likely to sign up 150,000 customers in the Tampa Bay service area in year 1, 350,000 in year 2 and 500,000 in year 3 at the $20 price per month level. 1. Prepare yearly pro-forma income statements for the $20 plan at this level of volume. Include the ROI. d. Should this stategy be launched? Do investors achieve their targeted 15% return? Write a paragraph to management describing your conclusions based on your work. GRADING RUBRIC 1. Linking, workpaper set up; workpapers are easy to follow Question A Question B Question C Question D-conclusion Logic and answering the question Spelling and grammar 6 6 2 6 3 2 25

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