question 2 A-F
NOTES: ) Turn in a hand-written hard copy of your solutions at the beginning of class. Typewritten solutions are terrible; and no electronic submissions. Show all calculations, It is not enough to just write down the answer 3) Indicate units of measurement (e.g.S or "units" for all mumbers, especially final answers Use fresh sheets of paper for your solutions (ruled notebook sheets are great). Don't try to write your answers on this question sheet; there isn't enough space 5) This assignment will be graded out of 30 points Jill Hawkins, Chief Marketing Officer for Millennium Sporting Equipment (MSE), Inc., must decide whether to introduce a mid-priced version of the firm's Voyager line of high performance recreational bicycles next year. The new model V 330 w uldsell r 90 with unit variable cost of $ l 80 Projections 1) made by the product development team indicate that the V.330 would achieve a sales volume of s0,000 units next year, its first year of commercialization. Sixty percent of the V.330's first year's sales volume is ed to come from competitors' products and market growth, and the remaining 40 percent from two models currently sold by MSE-60 percent from the higher-priced V-660 modcL(which sells for $590 with unit variable cost of $220) and 40 percent f variable cost of $120). If V-330 is not introduced, sales of the existing models next year are expected to be 40,000 units for V-660 and 60,000 units for V-220.The fixed costs of launching V-330 have been forecast to be $3 million from the d V-220 (priced at $250 with unit a) What is the cannibalization rate? (1 point) b) How many units each of V-220 and V-660 will be cannibalized? (2 points) e) How many incremental units of V-330 will be sold? (1 point) d) Should Ms. Hawkins add the V-330 model to the product line? Why? (6 points) 2) Planet Fitmess, Inc. is a Puerto Rico, Canada, the Dominican Republic, Panama and Mexico. The company is well-known for its S10 membership fees, although customers can also sign up for a more expensive $21.99 PF Black Card membership that comes with additional perks. Data analytics website Second Measure estimates that P Fitness's customer retention rate bers. Assume that 80% of these signed up for the basic S10 membership and theremaining 20% signed up for PF Black Card membership. Furthermore, assume that Planet Fitness incurs a variable cost o per franchisor and operator of fitness centers in 50 states, the District of Columbia, is 66%. As of September 30, 2018, the company had 12.2 million embership customer and $5.00 per PF Black Card customer. Planet Fitness's average weighted ost of capital (i.e. the interest rate it pays to borrow money is around 68% according to Guru Focus a) What is the customer lifetime value( b) What is the CLV of a customer with basic membership? (2 points) c) What was the CLV of the company's total customer d) What would be the CLV of a customer with basic membership if the monthly retention rate were 55 percent? (1.5 points) What would be the CLV of a customer with basic membership if the monthly retention rate were 90 percent? (1.5 points) f) Taken together what do the results in (b), (d), and (e) tell you about the impact of customer retention on customer lifetime value? (1 point) CLV) of a customer with PF Black Card membership? (2 points) portfolio as at Sept. 30, 2018? (2 points) ) Using the cost information in problem # 9 of the Chapter 2 problem set (Century Office Systems), do the following: ) Prepare a pro forma income statement for the Home Office Systems group given annual sales of only 18 million (5 points) b) Prepare a pro forma income statement for the Home Office Systems group at annual sales of $20,681,818 (5 points) NOTE: In both cases use the same procedure that we used in class to prepare the pro-forma incom statement for sales of $25 million. Include your supporting worksheets NOTES: ) Turn in a hand-written hard copy of your solutions at the beginning of class. Typewritten solutions are terrible; and no electronic submissions. Show all calculations, It is not enough to just write down the answer 3) Indicate units of measurement (e.g.S or "units" for all mumbers, especially final answers Use fresh sheets of paper for your solutions (ruled notebook sheets are great). Don't try to write your answers on this question sheet; there isn't enough space 5) This assignment will be graded out of 30 points Jill Hawkins, Chief Marketing Officer for Millennium Sporting Equipment (MSE), Inc., must decide whether to introduce a mid-priced version of the firm's Voyager line of high performance recreational bicycles next year. The new model V 330 w uldsell r 90 with unit variable cost of $ l 80 Projections 1) made by the product development team indicate that the V.330 would achieve a sales volume of s0,000 units next year, its first year of commercialization. Sixty percent of the V.330's first year's sales volume is ed to come from competitors' products and market growth, and the remaining 40 percent from two models currently sold by MSE-60 percent from the higher-priced V-660 modcL(which sells for $590 with unit variable cost of $220) and 40 percent f variable cost of $120). If V-330 is not introduced, sales of the existing models next year are expected to be 40,000 units for V-660 and 60,000 units for V-220.The fixed costs of launching V-330 have been forecast to be $3 million from the d V-220 (priced at $250 with unit a) What is the cannibalization rate? (1 point) b) How many units each of V-220 and V-660 will be cannibalized? (2 points) e) How many incremental units of V-330 will be sold? (1 point) d) Should Ms. Hawkins add the V-330 model to the product line? Why? (6 points) 2) Planet Fitmess, Inc. is a Puerto Rico, Canada, the Dominican Republic, Panama and Mexico. The company is well-known for its S10 membership fees, although customers can also sign up for a more expensive $21.99 PF Black Card membership that comes with additional perks. Data analytics website Second Measure estimates that P Fitness's customer retention rate bers. Assume that 80% of these signed up for the basic S10 membership and theremaining 20% signed up for PF Black Card membership. Furthermore, assume that Planet Fitness incurs a variable cost o per franchisor and operator of fitness centers in 50 states, the District of Columbia, is 66%. As of September 30, 2018, the company had 12.2 million embership customer and $5.00 per PF Black Card customer. Planet Fitness's average weighted ost of capital (i.e. the interest rate it pays to borrow money is around 68% according to Guru Focus a) What is the customer lifetime value( b) What is the CLV of a customer with basic membership? (2 points) c) What was the CLV of the company's total customer d) What would be the CLV of a customer with basic membership if the monthly retention rate were 55 percent? (1.5 points) What would be the CLV of a customer with basic membership if the monthly retention rate were 90 percent? (1.5 points) f) Taken together what do the results in (b), (d), and (e) tell you about the impact of customer retention on customer lifetime value? (1 point) CLV) of a customer with PF Black Card membership? (2 points) portfolio as at Sept. 30, 2018? (2 points) ) Using the cost information in problem # 9 of the Chapter 2 problem set (Century Office Systems), do the following: ) Prepare a pro forma income statement for the Home Office Systems group given annual sales of only 18 million (5 points) b) Prepare a pro forma income statement for the Home Office Systems group at annual sales of $20,681,818 (5 points) NOTE: In both cases use the same procedure that we used in class to prepare the pro-forma incom statement for sales of $25 million. Include your supporting worksheets
