Question
One way the Telco wants to use the bass model prediction is to support the big decision of whether to roll out their LeanStream service
One way the Telco wants to use the bass model prediction is to support the big decision of whether to roll out their LeanStream service to a wider market. Based on adoption patterns in their test market, assuming the market penetration forecast carries over to the wider market, the companys total (reachable) market size is 40 million households.
The company currently offers fiber optic service, where customers average monthly charge is $50 and the average monthly churn rate is 30%. The monthly maintenance cost for LeanStream customers is $5. The company estimates that, by switching to the LeanStream service, customers monthly charges will decrease by $5 (to $45 per month, on average), and that the monthly churn rate will be reduced to 25%. The monthly maintenance cost for LeanStream customers is still $5. To roll out LeanStream, they would incur one-time fixed costs of $150 million.
Assuming the monthly interest rate is 0.005, should the company launch the LeanStream service? Explain why or why not.
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