Q1. The Geeta Parkashan Publishers have been offered to publish Namendra Modi's autobiography. The manager at Geeta Parkashan wants to understand the proposal profitability amid the uncertainty between the demands of Mr. Modi's autobiography. The company is expected to give a one-time royalty payment of 3 50 Lakhs to Mr. Modi. The book will be published in hard binded cover as well as soft paperback cover version. The fixed cost of publishing the hard cover copy is 1 Lakh. The variable cost of producing one hardcover book is 100. Each hardcover copy is sold at 2700 and the manager is expecting to sell around 10, 00,000 copies of hard cover autobiography. Similarly, the fixed cost of publishing the paperback version is 10,000. The variable cost of publishing one paperback copy is 325. Price of paper back copies are often fixed at 1/3rd of the hard cover copies at Geeta Parkashan. As per the past ten years data, number of paperback copies sold for autobiographies are double that of the hard cover copies. This will be used to estimate the paperback demand from the estimated hard cover demand. (Hint: Find profit from hard cover sales and soft cover sales first without considering royalty payments. Then find total profits adjusting for royalty payments) (Q1.xlsx) Write each computational step in your copy and paste logical excel computation if required. Submit your Excel sheet also, a) Determine how the publisher's before tax profit will vary as the hard cover book demand is expected to vary from 100,000 copies to 10,00,000 copies (use step increment of 100,000) - and the ratio of paper back demand to hard cover demand varies from 1:1 through 3:1 (use step increment of 0.2 starting from 1 to 3) (5) b) If manager wishes to revise the royalty payment of 50 Lakhs to Mr. Modi, what royalty they should pay to earn net before tax profit of 100 crore. 151 c) In a given uncertain environment about people sentiments about Mr. Modi- create summary for the following three scenarios to understand the impact of uncertain inputs of before tax profits. (5) a. Negative sentiment - Demand for hardcover copies will be 100,000 copies. Royalty payment given will be 10 Lakhs. b. Positive sentiment - Demand for hardcover copies will be 20, 00,000 copies. Royalty payment given will be 2 60 Lakhs c. Neutral sentiment - is the one already jotted by the manager in first three paragraphs. B D E F G Mr Modi Royalty Payment Demand, Hard cover Fixed cost, Hard Cover Variable Cost, Hard Cover Selling Price, Hard Cover Paper Pack Demand Multiplier Demand, Soft cover Fixed cost, Soft Cover Variable Cost, Soft Cover Selling Price, Soft Cover 50,00,000.00 1000000 1,00,000.00 100.00 700.00 2.00 * Profit, Hard Cover Profit, Paperback Total Profit 3 . 1 Q1 -ady 115 VI Q1. The Geeta Parkashan Publishers have been offered to publish Namendra Modi's autobiography. The manager at Geeta Parkashan wants to understand the proposal profitability amid the uncertainty between the demands of Mr. Modi's autobiography. The company is expected to give a one-time royalty payment of 3 50 Lakhs to Mr. Modi. The book will be published in hard binded cover as well as soft paperback cover version. The fixed cost of publishing the hard cover copy is 1 Lakh. The variable cost of producing one hardcover book is 100. Each hardcover copy is sold at 2700 and the manager is expecting to sell around 10, 00,000 copies of hard cover autobiography. Similarly, the fixed cost of publishing the paperback version is 10,000. The variable cost of publishing one paperback copy is 325. Price of paper back copies are often fixed at 1/3rd of the hard cover copies at Geeta Parkashan. As per the past ten years data, number of paperback copies sold for autobiographies are double that of the hard cover copies. This will be used to estimate the paperback demand from the estimated hard cover demand. (Hint: Find profit from hard cover sales and soft cover sales first without considering royalty payments. Then find total profits adjusting for royalty payments) (Q1.xlsx) Write each computational step in your copy and paste logical excel computation if required. Submit your Excel sheet also, a) Determine how the publisher's before tax profit will vary as the hard cover book demand is expected to vary from 100,000 copies to 10,00,000 copies (use step increment of 100,000) - and the ratio of paper back demand to hard cover demand varies from 1:1 through 3:1 (use step increment of 0.2 starting from 1 to 3) (5) b) If manager wishes to revise the royalty payment of 50 Lakhs to Mr. Modi, what royalty they should pay to earn net before tax profit of 100 crore. 151 c) In a given uncertain environment about people sentiments about Mr. Modi- create summary for the following three scenarios to understand the impact of uncertain inputs of before tax profits. (5) a. Negative sentiment - Demand for hardcover copies will be 100,000 copies. Royalty payment given will be 10 Lakhs. b. Positive sentiment - Demand for hardcover copies will be 20, 00,000 copies. Royalty payment given will be 2 60 Lakhs c. Neutral sentiment - is the one already jotted by the manager in first three paragraphs. B D E F G Mr Modi Royalty Payment Demand, Hard cover Fixed cost, Hard Cover Variable Cost, Hard Cover Selling Price, Hard Cover Paper Pack Demand Multiplier Demand, Soft cover Fixed cost, Soft Cover Variable Cost, Soft Cover Selling Price, Soft Cover 50,00,000.00 1000000 1,00,000.00 100.00 700.00 2.00 * Profit, Hard Cover Profit, Paperback Total Profit 3 . 1 Q1 -ady 115 VI