CASE:

Pandora is the Internet’s most successful subscription radio service. In May 2014, Pandora had 77 million registered users. Pandora accounts for over 9 percent of total U.S. radio listening hours. The music is delivered to users from a cloud server, and is not stored on user devices.

It’s easy to see why Pandora is so popular. Users are able to hear only the music they like. Each user selects a genre of music based on a favorite musician or vocalist, and a computer algorithm puts together a “personal radio station” that plays the music of the selected artist plus closely related music by different artists. The algorithm uses more than 450 factors to classify songs, such as the tempo and number of vocalists. These classifications, in conjunction with other signals from users, help Pandora’s algorithms select the next song to play.

People love Pandora, but the question is whether this popularity can be translated into profits. How can Pandora compete with other online music subscription services and online stations that have been making music available for free, sometimes without advertising? “Free” illegally downloaded music has also been a significant factor, as has been iTunes, charging 99 cents per song with no ad support. At the time of Pandora’s founding (2005), iTunes was already a roaring success.

Pandora’s first model was to give away 10 hours of free music and then ask subscribers to pay $36 per month for a year once they used up their 10 free hours. Result: 100,000 people listened to their 10 hours for free and then refused to pay for the annual service. Facing financial collapse, in November 2005 Pandora introduced an ad-supported option. In 2006, Pandora added a “Buy” button to each song being played and struck deals with Amazon, iTunes, and other online retail sites. Pandora now gets an affiliate fee for directing listeners to sites where users can buy the music. In 2008, Pandora added an iPhone app to allow users to sign up from their smartphones and listen all day if they wanted. Today, 70 percent of Pandora’s advertising revenue comes from mobile.

In late 2009 the company launched Pandora One, a premium service that offered no advertising, higher quality streaming music, a desktop app, and fewer usage limits. The service costs $4.99 per month. A very small percentage of Pandora listeners have opted to pay for music subscriptions, with the vast majority opting for the free service with ads. In fiscal 2013 Pandora’s total revenue was $427.1 million, of which $375.2 million (88 percent) came from advertising.

Pandora has been touted as a leading example of the “freemium” revenue model, in which a business gives away some services for free and relies on a small percentage of customers to pay for premium versions of the same service. If a market is very large, getting just 1 percent of that market to pay could be very lucrative— under certain circumstances. Although freemium is an efficient way of amassing a large group of potential customers, companies, including Pandora, have found that it is challenging to convert people enjoying the free service into customers willing to pay. A freemium model works best when a business incurs very low marginal cost, approaching zero, for each free user of its services, when a business can be supported by the percentage of customers willing to pay, and when there are other revenues like advertising fees that can make up for shortfalls in subscriber revenues.

In Pandora’s case, it appears that revenues will continue to come overwhelmingly from advertising, and management is not worried. For the past few years, management has considered ads as having much more revenue-generating potential than paid subscriptions and is not pushing the ad-free service. By continually refining its algorithms, Pandora is able to increase user listening hours substantially. The more time people spend with Pandora, the more opportunities there are for Pandora to deliver ads and generate ad revenue. The average Pandora user listens to 19 hours of music per month.

Pandora is now intensively mining the data collected about its users for clues about the kinds of ads most likely to engage them. Pandora collects data about listener preferences from direct feedback such as likes and dislikes (indicated by thumbs up or down on the Pandora site) and “skip this song” requests, as well as data about which device people are using to listen to Pandora music, such as mobile phones or desktop computers. Pandora uses these inputs to select songs people will want to stick around for, and listen to. Pandora has honed its algorithms so they can analyze billions more signals from users generated over billions of listening minutes per month.

As impressive as these numbers are, Pandora (along with other streaming subscription services) is still struggling to show a profit. There are infrastructure costs and royalties to pay for content from the music labels. Pandora’s royalty rates are less flexible than those of its competitor Spotify, which signed individual song royalty agreements with each record label. Pandora could be paying even higher rates when its current royalty contracts expire in 2015. About 61 percent of Pandora’s revenue is currently allocated to paying royalties. Advertising can only be leveraged so far, because users who opt for free ad-supported services generally do not tolerate heavy ad loads.

QUESTION:

For Pandora, what business strategies are being supported by the use of data mining? Explain your answer.

1. A firm is solely financed by equity with market value of $50,000 and cost of equity of 10%. It wishes to raise another $50,000 via corporate bonds with cost of debt of 5% and keep it as cash. Hold investment policies fixed.
   1. In a MM world without taxes,
      1. What would the firm value be after debt issuance in a? Firm Value = Equity Value + Debt Value – Cash.
      2. What would be the cost of equity after debt is raised?
      3. What would be the WACC after debt is raised?
   2. In a MM world with taxes of 40%,
      1. What would be the cost of equity after debt is raised?
      2. What would be the additional value created by debt?
      3. What would be the WACC after debt is raised?

The plaintiff claims her copyrighted yoga class is being bent out of shape and she wants license fees paid up. The defendant claims yoga is an ancient practice and there is no one alive that can claim to own it. Please review the case below and answer the questions based on the case and your understanding of Intellectual Property.

1. Is the Plaintiff’s exercise regimen an original and creative work? Yes or No. Please Explain.
2. Is the regimen a tangible form of expression? Yes or No. Please Explain.
3. Is the Defendant practicing deceptive advertising because his version of Anandi Hop strays from the copyrighted description? Yes or No? Please explain.
4. Does the Plaintiff hold a legitimate copyright on this form of exercise? Yes or No? Please Explain.

5. Is the Defendant infringing on the Plaintiff’s copyright? Yes or no? Please explain.

"iq" "score"
x y
121.892046820712 71.4732161842994
75.3231199290853 12.9190592344864
80.7353976125424 84.9141085286923
91.9095844175845 -42.3921089304488
94.1810816902236 -2.68232999485699
74.5190342941783 -24.2780813181847
118.594093570274 -40.0049484447782
99.1881956204263 0.206020513001461
100.484172827288 -44.9265093418123
96.0242413527543 0.229195593669459
106.144043224744 -2.95492230511574
117.158103938701 -19.2870839962481
79.1373549726252 35.3110928438802
96.541524668086 -23.5780147739683
105.470758811032 49.1522774615725
99.5985999128748 46.5726851253841
104.657509123173 9.48271798764803
86.3158158693298 -25.4269048543043
99.438874992039 -51.9384680082999
100.622681970059 53.3745843562983
79.8678676984686 -25.4750123685849
95.3453801287767 71.6439973612334
141.213862915063 -101.574982678670
100.907577664697 -28.9536302196737
96.2850048629342 0.572812512692053
110.555125562625 -30.6826774054011
126.702100022565 -25.9491611074600
78.116682253087 35.0448127083859
125.763278192055 -75.4365676357808
110.189826539736 -50.4789618210432
120.031830825433 95.441082294667
116.329317367990 -106.118507300053
91.3995403545871 61.7697071542223
67.1717671017129 20.6464837044241
103.956885240671 32.2183861568908
86.8529900060136 -6.62538665297089
112.153597353581 -62.0198332837319
101.544038145957 30.5162192174453
93.6985690141871 35.6366257606887
87.1598523722415 21.8402446324802
103.462616811554 36.4885895758884
93.4347667994378 26.4040057054676
89.2652497474767 63.2711353718747
66.5978405012603 21.6577425446238
118.838468944248 -20.3441512849331
96.1288413662582 44.7060632457826
94.744795827725 30.7193736235243
113.682504871639 -42.5678535029876
105.513774174699 -83.3036944245307
71.8444310751677 -53.5048364428
100.58890486895 56.4962194732963
108.876211777875 103.445235880838
78.9430480237388 7.80940347320373
96.8297678060834 50.0130610322806
113.425045275841 17.7306044850652
86.1697147334069 17.8974687420377
116.037159955396 -42.8320987618029
119.580138905962 110.832617948753
103.338174318402 71.397769967437
87.4542064166235 26.6370103997221
107.931423538019 -62.4291410620053
93.3234404950854 34.1717868832087
109.935414030069 10.5531221389836
96.124422271583 -35.7486297469003
101.206463349905 -21.3592158893932
113.978895298155 -37.6762974283941
92.7129726656618 -1.62518154445572
73.8047499498416 -33.2577669802005
87.6233580483771 -58.7759846722668
102.043095811625 -76.041032261331
84.7637782121371 10.1170348523167
117.250471516515 -98.5203030147308
71.7903904694932 9.04534184739605
76.5910613013864 -33.0924340502142
85.9166485344142 30.3567794392743
73.0204726847607 90.5781558308057
100.757484102641 -35.0482995457613
88.9039906345846 21.8742995725425
115.831258476986 30.1076108060902
125.448279734077 8.19581879558203
83.3852255018193 18.5481168448278
112.092740665462 24.7132055187742
82.700890098919 -1.78898752445938
101.514155078929 57.3348558073038
100.594015128124 -44.1400342860949
103.464058992714 -43.6962212540387
80.4428672192393 -13.4302787051414
104.410590346905 99.2937613397461
115.931753255852 -41.9197152986158
92.289345654039 80.3955269941439
104.806332006923 -32.9543620657468
106.401550000696 -67.8922194894664
89.72709627167 -22.3866457703968
87.080465367208 31.9668321534374
94.7673933618738 21.3618384056050
110.446778275340 84.2311350392016
114.920059002627 43.8621189529085
92.6209783939604 25.4701688798426
112.900465998094 65.3601047313239
78.9561017673847 17.6248371204608

1.2 Conduct a linear regression of "iq" and score.

1.3 Do you reject or fail to reject the null hypothesis about the slope? Why (write a full explanation as discussed in class?

1.4 What is the interpretation of the coefficient for the slope in 1.3?

solve using R.

Case:

Pandora is the Internet’s most successful subscription radio service. In May 2014, Pandora had 77 million registered users. Pandora accounts for over 9 percent of total U.S. radio listening hours. The music is delivered to users from a cloud server, and is not stored on user devices.

It’s easy to see why Pandora is so popular. Users are able to hear only the music they like. Each user selects a genre of music based on a favorite musician or vocalist, and a computer algorithm puts together a “personal radio station” that plays the music of the selected artist plus closely related music by different artists. The algorithm uses more than 450 factors to classify songs, such as the tempo and number of vocalists. These classifications, in conjunction with other signals from users, help Pandora’s algorithms select the next song to play.

People love Pandora, but the question is whether this popularity can be translated into profits. How can Pandora compete with other online music subscription services and online stations that have been making music available for free, sometimes without advertising? “Free” illegally downloaded music has also been a significant factor, as has been iTunes, charging 99 cents per song with no ad support. At the time of Pandora’s founding (2005), iTunes was already a roaring success.

Pandora’s first model was to give away 10 hours of free music and then ask subscribers to pay $36 per month for a year once they used up their 10 free hours. Result: 100,000 people listened to their 10 hours for free and then refused to pay for the annual service. Facing financial collapse, in November 2005 Pandora introduced an ad-supported option. In 2006, Pandora added a “Buy” button to each song being played and struck deals with Amazon, iTunes, and other online retail sites. Pandora now gets an affiliate fee for directing listeners to sites where users can buy the music. In 2008, Pandora added an iPhone app to allow users to sign up from their smartphones and listen all day if they wanted. Today, 70 percent of Pandora’s advertising revenue comes from mobile.

In late 2009 the company launched Pandora One, a premium service that offered no advertising, higher quality streaming music, a desktop app, and fewer usage limits. The service costs $4.99 per month. A very small percentage of Pandora listeners have opted to pay for music subscriptions, with the vast majority opting for the free service with ads. In fiscal 2013 Pandora’s total revenue was $427.1 million, of which $375.2 million (88 percent) came from advertising.

Pandora has been touted as a leading example of the “freemium” revenue model, in which a business gives away some services for free and relies on a small percentage of customers to pay for premium versions of the same service. If a market is very large, getting just 1 percent of that market to pay could be very lucrative— under certain circumstances. Although freemium is an efficient way of amassing a large group of potential customers, companies, including Pandora, have found that it is challenging to convert people enjoying the free service into customers willing to pay. A freemium model works best when a business incurs very low marginal cost, approaching zero, for each free user of its services, when a business can be supported by the percentage of customers willing to pay, and when there are other revenues like advertising fees that can make up for shortfalls in subscriber revenues.

In Pandora’s case, it appears that revenues will continue to come overwhelmingly from advertising, and management is not worried. For the past few years, management has considered ads as having much more revenue-generating potential than paid subscriptions and is not pushing the ad-free service. By continually refining its algorithms, Pandora is able to increase user listening hours substantially. The more time people spend with Pandora, the more opportunities there are for Pandora to deliver ads and generate ad revenue. The average Pandora user listens to 19 hours of music per month.

Pandora is now intensively mining the data collected about its users for clues about the kinds of ads most likely to engage them. Pandora collects data about listener preferences from direct feedback such as likes and dislikes (indicated by thumbs up or down on the Pandora site) and “skip this song” requests, as well as data about which device people are using to listen to Pandora music, such as mobile phones or desktop computers. Pandora uses these inputs to select songs people will want to stick around for, and listen to. Pandora has honed its algorithms so they can analyze billions more signals from users generated over billions of listening minutes per month.

As impressive as these numbers are, Pandora (along with other streaming subscription services) is still struggling to show a profit. There are infrastructure costs and royalties to pay for content from the music labels. Pandora’s royalty rates are less flexible than those of its competitor Spotify, which signed individual song royalty agreements with each record label. Pandora could be paying even higher rates when its current royalty contracts expire in 2015. About 61 percent of Pandora’s revenue is currently allocated to paying royalties. Advertising can only be leveraged so far, because users who opt for free ad-supported services generally do not tolerate heavy ad loads.

CASE QUESTION:

What e-commerce revenue models are Pandora using? How does Pandora generate money with the revenue models? Explain your answer?

Ansoff’s product-market growth matrix is a framework that focus on increasing sales more than decreasing costs. It is very popular in business field.

Pick a product of your choice (not from the textbook) and use the Ansoff product-market growth matrix to design strategies for market penetration, product development, market development, and diversification for the said product.

1. What's the goal, requirement, and regulation for enterprise architecture?

2. How to survey the performance?

1. Lawson is a U.K- based wine and spirits company. It seeks to create a fine wine division to enhance its portfolio of global properties. The CFO is scrutinizing a proposal to make an investment in a vineyard in Chile. It requires the purchase of 20 acres of vineyards in the Maipo valley and setting up the requisite infrastructure for processing grapes and bottling wine. The project is expected to last five years, after which an exit through its sale to a local affiliate is assumed. The following table lists the cash flows denominated in the Chilean peso (CLP). Assume spot GBPCLP = 600

a. The appropriate CLP discount rate for projects of this nature is 15 percent. What is project NPV in CLP?

   b. Assume that GBPCLP remains constant at 600. Convert project cash flows into GBP (pounds). Using Lawson’s GBP WACC of 10 percent, calculate the project NPV in GBP.

Please show work and formulas used. Than You!

Rocky Mountain Corporation makes two types of hiking boots—Xactive and Pathbreaker. Data concerning these two product lines appear below:

The company has a conventional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below:

Required:

1-a. Compute the predetermined overhead rate based on direct labor-hours.

1-b. Using the predetermined overhead rate and other data from the problem, determine the unit product cost of each product.

2. The company is considering replacing its conventional costing system with an activity-based costing system that would assign its manufacturing overhead to the following four activity cost pools:

Determine the activity rate for each of the four activity cost pools.

3. Using the activity rates and other data from the problem, determine the unit product cost of each product.

XCo has 400 shares outstanding. It earns $1,000 per year and will use all $1,000 to repurchase its shares in the open market rather than pay dividends, required return = 10%. how many shares will be outstanding at the end of year 1, after the first share repurchase.

A) 393.9

B) 383.8

C) 373.7

D) 363.6

E) 353.5

The title of this episode in The Office is “Shareholder Meeting, which should give you some idea of why we’re watching it this week. In this episode, Michael, Dwight, Andy, and Oscar travel (via limo!) to a Dunder Mifflin shareholders meeting in New York City. Meanwhile, Jim and the rest of the crew remain in Scranton. Hijinx ensue. Based on the information given in the episode, does it seem like the Dunder Mifflin directors or officers could be held personally liable for their mismanagement of the corporation?

Over the years we have seen large changes in US federal income tax rates, with the highest marginal rates falling from 70% to under 40% today. Describe the impact of this change on the spread between US Treasury bonds and municipal bonds.

You are considering making a movie. The movie is expected to cost $10.3 million up front and take a year to produce. After​ that, it is expected to make $4.6 million in the year it is released and $1.9 million for the following four years. What is the payback period of this​ investment? If you require a payback period of two​ years, will you make the​ movie? Does the movie have positive NPV if the cost of capital is 10.9%​?

The company provides a reconciliation of the $5.66 EPS figures to the income statement’s reported EPS figure of $8.78. Also referred to as “Core EPS” in a PepsiCo-related press release, this figure, $5.66, is a non-GAAP financial measure many companies choose to report. What does a non-GAAP financial measure mean? What does the terminology “core” suggest to you? What is the reason that many companies provide non-GAAP financial information in their financial reports?