Question

1. Take Five Systems, a new start-up, is developing a new iPhone application (“app”) and provides you with the following assumptions: a. Development and testing of the new app will take four months. Month five is the first month of revenue generation. b. Initial monthly app sales of 5,000 downloads at a price of $2.99 c. Unit sales will grow at 15% per month for months six through twelve and then will be flat thereafter d. The app will become obsolete and will need to be revised/replaced after month 18 Use the data provided to forecast Take Five’s monthly revenue for Months 1-18

2. Take Five Systems is concerned about the accuracy of their revenue estimates in Question 1. Specifically, they wish to use sensitivity analysis to evaluate the impact on Month 18 revenue of the following: a. Variations in 2% increments between 9-21% in the growth rate of unit sales in Months 5-12 (that is, 9%, 11%,…, 19%, 21%) b. Variation in 500 unit increments between 2,500 and 7,500 in the level of initial sales (that is, 2,500, 3,000,…, 7,000, 7,500)

could you please show me how to do question 2 on excel? Thank you

Answer 1

	Q1	Unit Sales in Month 5	5,000
		Unit Sales in Month 6	5,750	(5000*(1+0.15)
		Unit Sales in Month (N+1)=1.15* Unit sales Month (N)				N+1 < or =12
				A	B=A*$2.99
			Month	Unit Sales	Monthly Revenue
			1	0	$0.00
			2	0	$0.00
			3	0	$0.00
			4	0	$0.00
			5	5,000	$14,950
			6	5,750	$17,193
			7	6,613	$19,771
			8	7,604	$22,737
			9	8,745	$26,148
			10	10,057	$30,070
			11	11,565	$34,580
			12	13,300	$39,767
			13	13,300	$39,767
			14	13,300	$39,767
			15	13,300	$39,767
			16	13,300	$39,767
			17	13,300	$39,767
			18	13,300	$39,767
				9% Growth : Revenue in Month 6=14950*1.09=				$16,296
				Revenue in Month( N+1)=1.09*Revenue in Month (N)
				Monthly Revenue
			Month	15% Growth	9% Growth	11% Growth	13% growth	17% Growth	19% growth	21% Growth
			1	$0	$0	$0	$0	$0	$0	$0
			2	$0	$0	$0	$0	$0	$0	$0
			3	$0	$0	$0	$0	$0	$0	$0
			4	$0	$0	$0	$0	$0	$0	$0
			5	$14,950	$14,950	$14,950	$14,950	$14,950	$14,950	$14,950
			6	$17,193	$16,296	$16,595	$16,894	$17,492	$17,791	$18,090
			7	$19,771	$17,762	$18,420	$19,090	$20,465	$21,171	$21,888
			8	$22,737	$19,361	$20,446	$21,571	$23,944	$25,193	$26,485
			9	$26,148	$21,103	$22,695	$24,376	$28,015	$29,980	$32,047
			10	$30,070	$23,002	$25,192	$27,544	$32,777	$35,676	$38,776
			11	$34,580	$25,073	$27,963	$31,125	$38,349	$42,454	$46,920
			12	$39,767	$27,329	$31,039	$35,171	$44,869	$50,521	$56,773
			13	$39,767	$27,329	$31,039	$35,171	$44,869	$50,521	$56,773
			14	$39,767	$27,329	$31,039	$35,171	$44,869	$50,521	$56,773
			15	$39,767	$27,329	$31,039	$35,171	$44,869	$50,521	$56,773
			16	$39,767	$27,329	$31,039	$35,171	$44,869	$50,521	$56,773
			17	$39,767	$27,329	$31,039	$35,171	$44,869	$50,521	$56,773
			18	$39,767	$27,329	$31,039	$35,171	$44,869	$50,521	$56,773
	b)