A major credit card company is launching a referral program, which gives an existing customer $50 for each new customer he or she refers to the company. The credit card company estimates that the average annual spending of a customer is $15,000, and the revenue for the credit card company would be 5% of the spending. The estimated marketing and operations costs for the referral program is $500,000 per year. a. Build a spreadsheet model for the credit card company to estimate the annual increase in profit gained from the referral program. If the referral program helps the credit card company acquire 25,000 new customers, what is the annual increase in profit gained from the referral program. Assume all new customers are acquired at the beginning of the year.

A major credit card company is launching a referral program, which gives an existing customer $50 for each new customer he or she refers to the company. The credit card company estimates that the average annual spending of a customer is $15,000, and the revenue for the credit card company would be 5% of the spending. The estimated marketing and operations costs for the referral program is $500,000 per year. a. Build a spreadsheet model for the credit card company to estimate the annual increase in profit gained from the referral program. If the referral program helps the credit card company acquire 25,000 new customers, what is the annual increase in profit gained from the referral program. Assume all new customers are acquired at the beginning of the year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

A home gods retailer offers a sales incentive program where customers receive credit towards future purchases based on the dollar amount of their purchases today. For every $10 spent, a customer receives a $1 credit to use in the next 30 days. Based upon historical trends, the firm estimates that 35% of the credits will be redeemed. Assume the credit associated with the sales incentive program is a separate performance obligation. If during the month the company sold $40,000 of product with a cost of $22,000, what is amount of revenue allocated to product sales? Round to the nearest dollar. $29,630 $36,364 $38,647 $40,000 None of the above
Microbiotics currently sells all of its frozen dinners cash-on-delivery but believes it can increase sales by offering supermarkets 1 month of free credit. The price per carton is $190, and the cost per carton is $110. The unit sales will increase from 1,140 cartons to 1,200 per month if credit is granted. Assume all customers pay their bills and take full advantage of any credit period offered. a. If the interest rate is 1% per month, what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Change in total monthly profit: ____ b. If the interest rate is 1.5% per month, what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers? (Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.) Change in…
1. A data analytics company wants Short Stop to provide a new client billing process which integrates their current customers with new payment options as well as technical. The payment for Short Stop's services would be structured with the specific payments to be $400,000 immediately, a further $300,000 at the end of the 2nd year, $500,000 at the end of the 4th year and $1,000,000 on completion at the end of the 7th year. The paid monies can be invested at a nominal rate of 9% p.a. compounded monthly. To complete the desired work Short Stop would have to purchase additional computers and data sources immediately which are valued at $1,500,000. In determining if this project is a viable project for Short Stop, your manager wants you to provide a detailed information on the differences between the effective rate of return and a nominal rate. In what circumstances can we use these to evaluate different investment opportunities?
You need to take out a loan of $35,000 to start up your T-shirt business. You have two possibilities: one bank is offering a 12% loan for 8 years, and another is offering a 15% loan for 6 years. Which loan has the lower monthly payments? Show work.
Our start-up costs include the cost of leasing and renovating the store, purchasing inventory, and salary. We estimate our start-up costs to be $200,000. Amount of the loan 100,000 Personal savings 100,000 Our ongoing operating costs include rent, utilities, payroll, inventory, and marketing expenses. We estimate our monthly operating costs to be $30,000 We plan to finance our start-up costs through a combination of personal savings, loans from a financial institution Revenue 20,000 We estimate our break-even point to be approximately $50,000 in monthly revenue. This means that we will need to generate at least $50,000 in sales each month to cover our operating costs and break even. From the above information Prepare a Balance sheet, income statement, and financial statements Prepare Pro Forma (Projected) Financial Statements for Three to Five Years If anything is wrong in this please solve which ever way is correct and explain
Please use excel to show your work Eleven wants to purchase her own restaurant. The initial investment required is $500,000 which shewould need to borrow from a bank that is offering an annual interest rate of 6.9% compoundedmonthly for 5 years, with constant total payments.a. Calculate the loan payment that Eleven would make semi-monthly (24 times per year) for 5 years. B. Create the annual loan payment schedule for the restaurant, showing the beginning and endingprincipal, principal repayment, and interest over the life of the loan.
Raghubhai
REQUIRED : a) Compute the breakeven point in unit and RM. b) Compute the number of children, if the MESRA Kids target the net operation incomeis RM5,000 per month.
i need the answer quickly
You need $10,000 in six years. Which one of the following requires the lowest investment today? Investment A: A bank account paying 5% compounded annually. Investment B: A bank account paying 5% simple interest. Investment C: A bank account paying 5.5% simple interest. Investment A Investment B Investment C You need $10,000 in six years. Which one of the following requires the highest investment today? Investment A: A bank account paying 5.5% compounded annually. Investment B: A bank account paying 5% compounded annually. Investment C: A bank account paying 5.5% simple interest. Investment A Investment B Investment C You save $10,000 for five years. Which one of the following will have the lowest future value? Investment A: A bank account paying 5.5% compounded annually. Investment B: A bank account paying 5% compounded annually. Investment C: A bank account paying 5.5% simple interest. Investment A Investment…
Annie's Homemade is considering buying an ice cream truck at the beginning of April for $46,500. The ice cream truck's estimated monthly net cash inflows are as follows: April May June July August September October November $ 2,000 $ 6,000 $ 8,000 The payback period is $ 12,000 $ 14,000 $ 9,000 $ 7,000 $ 1,000 Required: 1. What is the ice cream truck's payback period in months? Note: Round your answer to 1 decimal place. months
PLEASE EXPLAIN TO BETTER UNDERSTAND.