A cell phone provider has acquired 10,000 new customers who have decided to sign up for...
A cell phone provider has acquired 10,000 new customers who have decided to sign up for unlimited cell phone service for at least one year for a monthly fee of $80. The variable costs of providing the service are $10 per customer per month. Payment is due at the end of each month.
a. What’s the net present value of the profits from this customer base for the first year? Assume a monthly discount rate of 1 percent.
b. What would we need to know to calculate the net present value of the profits over five years?
Homework Answers
a. What’s the net present value of the profits from this
customer base for the first year? Assume a monthly discount rate of
1 percent.
=(80-10)*10000/1%*(1-1/1.01^12)=7878554.231
b. What would we need to know to calculate the net present value
of the profits over five years?
The interest rate movements over five years
Whther fees and costs are constant or they change
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