Company Y acquired The Seoul Post in February 2021 for $315 million. Suppose the yearly margin per Seoul Post reader is $1 per year (coming from advertising), and the yearly retention rate is 70%, and assume a yearly discount rate of 10%. How many new readers should the Seoul Post acquire to close that gap, assuming an acquisition cost of $0.50 per reader? That is, how many new readers should it acquire to raise the CLV of its readers to $315 million, where the CLV of new readers is reduced by the acquisition cost?

Company Y acquired The Seoul Post in February 2021 for $315 million. Suppose the yearly margin per Seoul Post reader is $1 per year (coming from advertising), and the yearly retention rate is 70%, and assume a yearly discount rate of 10%. How many new readers should the Seoul Post acquire to close that gap, assuming an acquisition cost of $0.50 per reader? That is, how many new readers should it acquire to raise the CLV of its readers to $315 million, where the CLV of new readers is reduced by the acquisition cost?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 11P

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Company Y acquired The Seoul Post in February 2021 for $315 million. Suppose the yearly margin per Seoul Post reader is $1 per year (coming from advertising), and the yearly retention rate is 70%, and assume a yearly discount rate of 10%. What is the difference between the price for which Company Y acquired the Seoul Post and the CLV of the 120 million unique visitors who will visit the Seoul Post this month?
Acme is looking to acquire Pinder Co now. Acme is expected to generate annual cash flows of $15,000,000 in perpetuity and Pinder is expected to generate annual cash flows of $6,000,000 in perpetuity. The discount rate for both Acme and Pinder is 8%. If Acme acquires Pinder, Acme expects to be able to reduce operating costs by $4,500,000 for the first five years. However, Acme will also incur integration costs of $3,000,000 in the first year. All cash flows occur at the end of the year. To encourage investment into electric bicycles, the government is offering Acme an option to abandon its operations and sell all related assets for $1 million at the end of year 4. If Acme chooses the option to sell all related assets to the government, it will not receive the cash flows generated from the electric bicycle business in that year. What is the value of this option? Answer based only on the information provided.
Southern Tours is considering acquiring Holiday Vacations. Management believes Holiday Vacations can generate cash flows of $185,000, $225,000, and $345,000 over the next three years, respectively. After that time, they feel the business will be worthless. If the desired rate of return is 12 percent, what are the maximum Southern Tours should pay today to acquire Holiday Vacations? a. 503,098 b. 538,615 c. $545,920 d. $590,110
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Frederick Consulting had just landed a white whale of a customer, Wilfrid Laurier University, after spending $52,000 in initial acquisition costs! Laurier is expected to generate $39,000 a year in margin, and Frederick Consulting expects this relationship to last for a very long time (decades). Additional costs to serve and retain Laurier are estimated to be $20,000 annually. The retention rate per period is 92%. The cost of capital for Frederick Consulting is 15%. What is the customer lifetime value of Wilfrid Laurier University for Frederick Consulting?
Frederick Consulting had just landed a white whale of a customer, Wilfrid Laurier University, after spending $52,000 in initial acquisition costs! Laurier is expected to generate $39,000 a year in margin, and Frederick Consulting expects this relationship to last for a very long time (decades). Additional costs to serve and retain Laurier are estimated to be $20,000 annually. The retention rate per period is 92%. The cost of capital for Frederick Consulting is 15%. What is the customer lifetime value of Wilfrid Laurier University for Frederick Consulting? Please answer with full solutions. Thank you!
Nokela Industries purchases a $42.0 million cyclo-converter. The cyclo-converter will be depreciated by $10.5 million per year over four years, starting this year. Suppose Nokela's tax rate is 25%. a. What impact will the cost of the purchase have on earnings for each of the next four years? b. What impact will the cost of the purchase have on the firm's cash flow for the next four years? a. What impact will the cost of the purchase have on earnings for each of the next four years? Earnings will ▼ by $enter your response here million each year for four years. (Select from the drop-down menu and round to one decimal place.) Part 2 b. What impact will the cost of the purchase have on the firm's cash flow for the next four years? The impact on the firm's cash flow in year 1 is $enter your response here million. (Round to one decimal place.) Part 3 The impact on the firm's cash flow in years two through four is $enter your response here million. (Round to one decimal place.)
Southern Tours is considering acquiring Holiday Vacations. Management believes Holiday Vacations can generate cash flows of $218,000, $224,000, and $235,000 over the next three years, respectively. After that time, they feel the business will be worthless. If the desired rate of return is 13.6 percent, what is the maximum Southern Tours should pay today to acquire Holiday Vacations? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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Marko, Inc., is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $5,800, $10,800, and $17,000 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has determined that a rate of return of 12 percent is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Co.?