Problem 1: Insta-opportunity You are the new VP of Customer Marketing for Scrimshaw, a new direct- to-consumer lifestyle clothing brand. The company was founded by Elizabeth Donovan, a veteran of the fashion apparel industry. She previously held senior posts at J. Crew and Calvin Klein. The launch of Scrimshaw attracted early investments form celebrities such as Reese Witherspoon, Sarah Jessica Parker, and Mary-Kate and Ashley Olsen. Donovan has brokered an opportunity with Facebook/Instagram to feature Scrimshaw prominently on Instagram, specifically, for a year. The deal requires an upfront payment of $5 million and $10,000/day in measured media spend for a full year. In exchange, Instagram will feature Scrimshaw prominently in a high-profile sponsorship integration, and provide advertising media at a cost that is significantly below market. Donovan expects that Scrimshaw would be present on 5% of 100 million daily active user sessions. Based on industry estimates, and her prior experience, Donovan believes that 0.25% of every session would lead to a visit to the Scrimshaw website. 1.5% of site visitors typically place an order. While the company is too young to have good historical retention rates, they believe visitors from Instagram are a strong match for brand, and assume an 80% retention rate. The dollar amount of a typical order is $140. Scrimshaw's CFO, Adam Wiley, worries that the deal will not be worthwhile, given the brand's 30% gross margin per order and 10% cost of capital. What is your recommendation? Assume that customers acquired at the end of the year are worth the same as those acquired at the beginning of the year. You should also assume a discount rate of 10%