Q1: Shannon's brewery currently boasts a customer base of 1,750 customers that frequent thebrewhouse on average twice per month and spend $26 per visit. Shannon 's current variable cost ofgoods sold is 50% of sales. The customer retention rate per month is 0.78, based on data collectedfrom its website and an analysis of credit card receipts. Its current cost of capital for borrowing andinvesting is about 12% per year, or 1% per month. What is Shannon's approximate CLV for its averagecustomer? Compute your answer to the nearest penny.

Customer Lifetime Value (CLV): It represents the value contributed by the customer to the business…

Answered: customer? Compute your answer to the…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter16: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 11P

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Q1: Shannon’s brewery currently boasts a customer base of 1,750 customers that frequent the brewhouse on average twice per month and spend $34 per visit. Shannon ‘s current variable cost of goods sold is 50% of sales. The customer retention rate per month is 0.83% , based on data collected from its website and an analysis of credit card receipts. Its current cost of capital for borrowing and investing is about 12% per year, or 1% per month. What is Shannon’s approximate CLV for its average customer? Compute your answer to the nearest penny.
Ivanhoe Traders has annual sales of $1,600,000. The firm's financial manager has determined that using a lockbox will reduce collection time by 2.1 days. If the firm's opportunity cost on savings is 4.90 percent, what are the savings from using the lockbox? (Do not round itermediate calculations. Use 365 days for calculation. Round answer to 2 decimal places, e.g. 12.25.) what is the Savings from using the lockbox?
Enticement Co currently expects sales of $50,000 a month. Variable costs of sales are $40,000 a month (all payable in the month of sale). It is estimated that if the credit period allowed to accounts receivable were to be increased from 30 days to 60 days, sales volume would increase by 20%. All customers would be expected to take advantage of the extended credit. The cost of capital is 12 1/2% a year. What is the increase in accounts receivable? What is the financing cost (cost of capital) based on additional sales? What is the annual contribution margin on additional sales? What is the annual net benefit from extending credit period?
ACE Design has daily sales of $52,000. The financial management team has determined that a lockbox would reduce the collection time by 2.9 days. Assuming the company can earn 6.8 percent interest per year, what are the savings from the lockbox? (Round answer to 2 decimal places, e.g. 12.25.) Savings from the lockbox $__________ per year
(Efficiency analysis) ALei Industries has credit sales of $143 million a year ALef's management revwed ts anddei t is the maximum level of accounts receivable that ALei can carry and have a 45-day average colledtion period? Leis current accounts receivable collection period is 55 days, how much would it have lo reduce its level of accounts recelvable in oander to adi a. What is the maximum level of accounts receivable that ALei can carry and have a 45-day average collection period? b. The maximum level of accounts receivable vilbe smillion Round to one decimal place) The maximum level of accounts receivable will be S million.
XYZ Company sells books to universities. The company policy is to sell 60% cash and the rest in a form of accounts receivables to be collected after 3 months, the cost should be paid 65% cash and the rest in a form of accounts payables to be paid after 1 months. Assuming that the company sales increase by 9% monthly and its COGS increases by 7% monthly. The required is to a. Fill the table. b. What does it mean to have negative cash flow while the company is making profits? c. Provide recommendations to XYZ company. \table[[Month, Jan., Feb., March, April, May], [Sales, $125,000,,,,], [COGS, $110,000,,,,], [Cash inflow,...], [Cash Outflow,...], [\table [[Accounting Net], [ Profit/Loss]],.,,,], [NCF,,,,, ]]
Carla Vista Design has daily sales of $54,000. The financial management team has determined that a lockbox would reduce the collection time by 1.7 days. Assuming the company can earn 4.1 percent interest per year, what are the savings from the lockbox? (Round answer to 2 decimal places, e.g. 12.25.) what is the Savings from the lockbox per year?
Data on Nathan Enterprises has determined that it needs Php 7.8 million in cash per week. If Data on Nathan Enterprises needs additional cash, it can sell marketable securities, incuring a fee of Php 500 for each transaction. If Data on Nathan Enterprises leaves funds in its marketable securities, it expects to earn approximately 0.6% per week on their investment. Using the economic order quantity model, how much cash should Data on Nathan Enterprises raise from selling securities each week to minimize its costs of cash? 5.
eBook Lewis Lumber is considering changing its credit terms from net 55 to net 30 to bring its terms in line with other firms in the industry. Currently, annual sales are $360,000, and the average collection period (DSO) is 60 days. Lewis estimates tightening the credit terms will reduce annual sales to $356,000, but accounts receivable would drop to 35 days of sales. Lewis' variable cost ratio is 60 percent and its average cost of funds is 9 percent. Should the change in credit terms be made? Assume all operating costs are paid at the time inventory is sold and all sales are collected at the DSO. Assume there are 360 days in a year. Do not round intermediate calculations. Round your answers to the nearest cent. The NPV for the existing credit policy, that is $ , is the NPV for the proposed credit policy, that is $ . Thus, Lewis Lumber change its credit policy.
In evaluating a proposal to extend credit, new customers will generate an average of $11000 per day in new sales. On average, he will pay in 30 days. The variable cost ratio (COGS) is 25% of sales, administration expenses are 3% of sales, and the discount rate interest in the MKT is 0.06 What is the NPV of one day's sales
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. Profit increase b. It is estimated that 10% of the customers acquired through the referral program would have become customers of the credit card company even without the referral program. How does this information change the…
Berries Salad has current sales of RM10,000 and a profit margin of 5%. The firm estimates that sales will increase by 4% next year and all costs will vary directly with sales. What is the pro forma net income? Select one: a. RM500.00 b. RM420.00 c. RM405.60 d. RM520.00

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