Contact Cost

Response Cost
Acquisition Cost

Workers Needed
Worker Labor Cost/hou
Instructors Needed
Instructors Labor Cost
Total Cost/hour

Price/hour
Margin/hour
Margin/hour(in percent
Annual hours
Annual Margin
Little Leaguers Summer Sluggers Elite Ballplayers Elite Ballplayers
(Print Ad) (Party)
1000 1500 300 12500
0.1 0.15 0.005 0.25
10000 10000 60000 50000

Little Leaguers Summer Sluggers Elite Ballplayers Elite Ballplayers

(Print Ad) (Party)
2 1 1 1
1500 1500 1500 1500
1 0 1 1
3000 0 4500 4500
6000 1500 6000 6000

6500 3000 7500 7500

500 1500 1500 1500
8.3333333333 100 25 25
10 4 20 20
5000 6000 30000 30000
Entertainment Seekers

50
0.025
2000

Entertainment Seekers

2
1500
0
0
3000

4000
1000 s
33.3333333333
1.5
1500
Elite Ballplayers Year 1 Year 2
(Print Ad)
Hourly Revenue 7500 7500
Hourly Cost 6000 6000
Hourly Margin 1500 1500
No. of hours 20 20
Annual Margin 30000 30000
Survival Probability(%) 100 60

Customer Acquisition Cost 60000

Annaul Profit -30000 18000
NPV of Annual profit -30000 16363.636364
Cumulative Profit till date -30000 -12000
NPV of Annual profit till date -30000 -13636.363636

Summer Sluggers Year 1 Year 2

Hourly Revenue 3000 3000
Hourly Cost 1500 1500
Hourly Margin 1500 1500
No. of hours 4 4
Annual Margin 6000 6000
Survival Probability(%) 100 50

Customer Acquisition Cost 10000

Annaul Profit -4000 3000
NPV of Annual profit -4000 2727.2727273
Cumulative Profit till date -4000 -1000
NPV of Annual profit till date -4000 -1272.7272727

Little Leaguers Year 1 Year 2

Hourly Revenue 6500 6500

Hourly Cost 6000 6000
Hourly Margin 500 500
No. of hours 10 10
Annual Margin 5000 5000
Survival Probability(%) 100 75

Customer Acquisition Cost 10000

Annaul Profit -5000 3750
NPV of Annual profit -5000 3409.0909091
Cumulative Profit till date -5000 -1250
NPV of Annual profit till date -5000 -1590.9090909
Elite Ballplayers Year 1 Year 2
(Party)
Hourly Revenue 7500 7500
Hourly Cost 6000 6000
Hourly Margin 1500 1500
No. of hours 20 20
Annual Margin 30000 30000
Survival Probability(%) 100 60

Customer Acquisition Cost 50000

Annaul Profit -20000 18000
NPV of Annual profit -20000 16363.636364
Cumulative Profit till date -20000 -2000
NPV of Annual profit till date -20000 -3636.3636364

Entertainment Seeker Year 1 Year 2

Hourly Revenue 4000 4000

Hourly Cost 3000 3000
Hourly Margin 1000 1000
No. of hours 1.5 1.5
Annual Margin 1500 1500
Survival Probability(%) 100 35

Customer Acquisition Cost 2000

Annaul Profit -500 525
NPV of Annual profit -500 477.27272727
Cumulative Profit till date -500 25
NPV of Annual profit till date -500 -22.727272727
Year 3 Year 4

7500 7500
6000 6000
1500 1500
20 20
30000 30000
36 21.6

10800 6480
8925.6198347108 4868.5199
-1200 5280
-4710.7438016529 157.77611

Year 3
3000
1500
1500
4
6000
25

1500
1239.6694214876
500
-33.0578512397

Year 3

6500
6000
500
10
5000
56.25

2812.5
2324.3801652893
1562.5
733.4710743802
Year 3

7500
6000
1500
20
30000
36

10800
8925.6198347108
8800
5289.2561983471
Retention Rate 0.75 0.5 0.6 0.6 0.35
Interest Rate 0.1

# of Orders
Order Size
Margin %
Annual Margin $
Survival Rate
Customer Acquisition Cost11

Cost of Mailing Catalogs11

Annual Profit
NPV of Annual Profit
Cumulative Profit to Date
NPV of Cumulative Profit to Date
 0 1 2 3 4 5 6
1 2 3 4 5 6 7
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Little Leaguers
Hourly Revenues 6500 6500 6500 6500 6500 6500 6500
Hourly Costs 6000 6000 6000 6000 6000 6000 6000
Hourly Margin 500 500 500 500 500 500 500
# of Annual Hours 10 10 10 10 10 10 10
Annual Margin ¥ 5000 5000 5000 5000 5000 5000 5000
Survival Rate 1 0.75 0.5625 0.421875 0.3164063 0.2373047 0.1779785
Customer Acquisition Cost 10000
Annual Profit -5000 3750 2812.5 2109.375 1582.0313 1186.5234 889.89258
NPV of Annual Profit -5000 3409.0909 2324.3802 1584.8047 1080.5486 736.7377 502.32116
-340.9091 -488.1198 -524.5703 -501.4826 -449.7857 -387.5714
-829.0289 -1353.599 -1855.082 -2304.868 -2692.439
Cumulative Profit to Date -5000 -1250 1562.5 3671.875 5253.9063 6440.4297 7330.3223
NPV of Cumulative Profit to Da -5000 -1590.909 733.47107 2318.2757 3398.8244 4135.5621 4637.8832

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Summer Sluggers
Hourly Revenues 3000 3000 3000 3000 3000 3000 3000
Hourly Costs 1500 1500 1500 1500 1500 1500 1500
Hourly Margin 1500 1500 1500 1500 1500 1500 1500
# of Annual Hours 4 4 4 4 4 4 4
Annual Margin ¥ 6000 6000 6000 6000 6000 6000 6000
Survival Rate 1 0.5 0.25 0.125 0.0625 0.03125 0.015625
Customer Acquisition Cost 10000
Annual Profit -4000 3000 1500 750 375 187.5 93.75
NPV of Annual Profit -4000 2727.2727 1239.6694 563.4861 256.13005 116.42275 52.919431
-272.7273 -260.3306 -186.5139 -118.87 -71.07725 -40.83057
-533.0579 -719.5718 -838.4417 -909.519 -950.3495
Cumulative Profit to Date -4000 -1000 500 1250 1625 1812.5 1906.25
NPV of Cumulative Profit to Da -4000 -1272.727 -33.05785 530.42825 786.5583 902.98104 955.90047

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Elite Ballplayers (Print Ad)
Hourly Revenues 7500 7500 7500 7500 7500 7500 7500
Hourly Costs 6000 6000 6000 6000 6000 6000 6000
Hourly Margin 1500 1500 1500 1500 1500 1500 1500
# of Annual Hours 20 20 20 20 20 20 20
Annual Margin ¥ 30000 30000 30000 30000 30000 30000 30000
Survival Rate 1 0.6 0.36 0.216 0.1296 0.07776 0.046656
Customer Acquisition Cost 60000
Annual Profit -30000 18000 10800 6480 3888 2332.8 1399.68
NPV of Annual Profit -30000 16363.636 8925.6198 4868.5199 2655.5563 1448.4853 790.08287
-1636.364 -1874.38 -1611.48 -1232.444 -884.3147 -609.5971
-3510.744 -5122.224 -6354.668 -7238.982 -7848.579
Cumulative Profit to Date -30000 -12000 -1200 5280 9168 11500.8 12900.48
NPV of Cumulative Profit to Da -30000 -13636.36 -4710.744 157.77611 2813.3324 4261.8177 5051.9006

Year 1 Year 2 Year 3 Year 4 Year Year Year

Entertainment Seekers
Hourly Revenues 4000 4000 4000 4000 4000 4000 4000
Hourly Costs 3000 3000 3000 3000 3000 3000 3000
Hourly Margin 1000 1000 1000 1000 1000 1000 1000
# of Annual Hours 1.5 1.5 1.5 1.5 1.5 1.5 1.5
Annual Margin ¥ 1500 1500 1501 1502 1503 1504 1505
Survival Rate 1 0.35 0.1225 0.042875 0.0150063 0.0052522 0.0018383
Customer Acquisition Cost 2000
Annual Profit -500 525 183.8725 64.39825 22.554394 7.89929 2.7665898
NPV of Annual Profit -500 477.27273 151.96074 48.383358 15.404954 4.9048376 1.5616678
-47.72727 -31.91176 -16.01489 -7.149439 -2.994452 -1.204922
-79.63903 -95.65392 -102.8034 -105.7978 -107.0027
Cumulative Profit to Date -500 25 208.8725 273.27075 295.82514 303.72443 306.49102
NPV of Cumulative Profit to Da -500 -22.72727 129.23347 177.61683 193.02178 197.92662 199.48829

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Elite Ballplayers (Party)
Hourly Revenues 7500 7500 7500 7500 7500 7500 7500
Hourly Costs 6000 6000 6000 6000 6000 6000 6000
Hourly Margin 1500 1500 1500 1500 1500 1500 1500
# of Annual Hours 20 20 20 20 20 20 20
Annual Margin ¥ 30000 30000 30000 30000 30000 30000 30000
Survival Rate 1 0.6 0.36 0.216 0.1296 0.07776 0.046656
Customer Acquisition Cost 50000
Annual Profit -20000 18000 10800 6480 3888 2332.8 1399.68
NPV of Annual Profit -20000 16363.636 8925.6198 4868.5199 2655.5563 1448.4853 790.08287
-1636.364 -1874.38 -1611.48 -1232.444 -884.3147 -609.5971
-3510.744 -5122.224 -6354.668 -7238.982 -7848.579
Cumulative Profit to Date -20000 -2000 8800 15280 19168 21500.8 22900.48
NPV of Cumulative Profit to Da -20000 -3636.364 5289.2562 10157.776 12813.332 14261.818 15051.901
 7 8 9 10 11 12 13 14 15 16
8 9 10 11 12 13 14 15 16 17
Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17

6500 6500 6500 6500 6500 6500 6500 6500 6500 6500
6000 6000 6000 6000 6000 6000 6000 6000 6000 6000
500 500 500 500 500 500 500 500 500 500
10 10 10 10 10 10 10 10 10 10
5000 5000 5000 5000 5000 5000 5000 5000 5000 5000
0.1334839 0.1001129 0.0750847 0.0563135 0.0422351 0.0316764 0.0237573 0.0178179 0.0133635 0.0100226

667.41943 500.56458 375.42343 281.56757 211.17568 158.38176 118.78632 89.08974 66.817305 50.112979
342.4917 233.51707 159.21618 108.55649 74.015788 50.46531 34.408166 23.460113 15.995532 10.906044
-324.9277 -267.0475 -216.2072 -173.0111 -137.1599 -107.9165 -84.37815 -65.62963 -50.82177 -39.20693
-3017.367 -3284.414 -3500.622 -3673.633 -3810.793 -3918.709 -4003.087 -4068.717 -4119.539 -4158.745
7997.7417 8498.3063 8873.7297 9155.2973 9366.473 9524.8547 9643.641 9732.7308 9799.5481 9849.6611
4980.3749 5213.892 5373.1082 5481.6647 5555.6805 5606.1458 5640.5539 5664.014 5680.0096 5690.9156

Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17

3000 3000 3000 3000 3000 3000 3000 3000 3000 3000
1500 1500 1500 1500 1500 1500 1500 1500 1500 1500
1500 1500 1500 1500 1500 1500 1500 1500 1500 1500
4 4 4 4 4 4 4 4 4 4
6000 6000 6000 6000 6000 6000 6000 6000 6000 6000
0.0078125 0.0039063 0.0019531 0.0009766 0.0004883 0.0002441 0.0001221 6.104E-05 3.052E-05 1.526E-05

46.875 23.4375 11.71875 5.859375 2.9296875 1.4648438 0.7324219 0.3662109 0.1831055 0.0915527
24.054287 10.933767 4.969894 2.2590427 1.0268376 0.4667444 0.2121565 0.0964348 0.043834 0.0199245
-22.82071 -12.50373 -6.748856 -3.600332 -1.90285 -0.998099 -0.520265 -0.269776 -0.139271 -0.071628
-973.1702 -985.674 -992.4228 -996.0232 -997.926 -998.9241 -999.4444 -999.7142 -999.8534 -999.9251
1953.125 1976.5625 1988.2813 1994.1406 1997.0703 1998.5352 1999.2676 1999.6338 1999.8169 1999.9084
979.95476 990.88853 995.85842 998.11746 999.1443 999.61105 999.8232 999.91964 999.96347 999.9834

Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17

7500 7500 7500 7500 7500 7500 7500 7500 7500 7500
6000 6000 6000 6000 6000 6000 6000 6000 6000 6000
1500 1500 1500 1500 1500 1500 1500 1500 1500 1500
20 20 20 20 20 20 20 20 20 20
30000 30000 30000 30000 30000 30000 30000 30000 30000 30000
0.0279936 0.0167962 0.0100777 0.0060466 0.003628 0.0021768 0.0013061 0.0007836 0.0004702 0.0002821

839.808 503.8848 302.33088 181.39853 108.83912 65.30347 39.182082 23.509249 14.10555 8.4633297
430.95429 235.06598 128.21781 69.936985 38.147446 20.807698 11.349653 6.1907201 3.3767564 1.8418671
-408.8537 -268.8188 -174.1131 -111.4615 -70.69167 -44.49577 -27.83243 -17.31853 -10.72879 -6.621463
-8257.433 -8526.252 -8700.365 -8811.827 -8882.518 -8927.014 -8954.846 -8972.165 -8982.894 -8989.515
13740.288 14244.173 14546.504 14727.902 14836.741 14902.045 14941.227 14964.736 14978.842 14987.305
5482.8548 5717.9208 5846.1386 5916.0756 5954.2231 5975.0308 5986.3804 5992.5711 5995.9479 5997.7898

Year Year Year Year Year Year Year Year Year Year

4000 4000 4000 4000 4000 4000 4000 4000 4000 4000
 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000
1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5
1506 1507 1508 1509 1510 1511 1512 1513 1514 1515
0.0006434 0.0002252 7.882E-05 2.759E-05 9.655E-06 3.379E-06 1.183E-06 4.14E-07 1.449E-07 5.071E-08

0.9689498 0.3393576 0.118854 0.0416265 0.0145789 0.005106 0.0017883 0.0006263 0.0002194 7.682E-05
0.4972245 0.1583128 0.0504057 0.0160488 0.0051098 0.0016269 0.000518 0.0001649 5.251E-05 1.672E-05
-0.471725 -0.181045 -0.068448 -0.025578 -0.009469 -0.003479 -0.00127 -0.000461 -0.000167 -6.01E-05
-107.4745 -107.6555 -107.724 -107.7495 -107.759 -107.7625 -107.7637 -107.7642 -107.7644 -107.7644
307.45997 307.79933 307.91818 307.95981 307.97439 307.9795 307.98128 307.98191 307.98213 307.98221
199.98551 200.14383 200.19423 200.21028 200.21539 200.21702 200.21754 200.2177 200.21775 200.21777

Year 8 Year 9 Year 10 Year 11 Year Year Year Year Year Year

7500 7500 7500 7500 7500 7500 7500 7500 7500 7500
6000 6000 6000 6000 6000 6000 6000 6000 6000 6000
1500 1500 1500 1500 1500 1500 1500 1500 1500 1500
20 20 20 20 20 20 20 20 20 20
30000 30000 30000 30000 30000 30000 30000 30000 30000 30000
0.0279936 0.0167962 0.0100777 0.0060466 0.003628 0.0021768 0.0013061 0.0007836 0.0004702 0.0002821

839.808 503.8848 302.33088 181.39853 108.83912 65.30347 39.182082 23.509249 14.10555 8.4633297
430.95429 235.06598 128.21781 69.936985 38.147446 20.807698 11.349653 6.1907201 3.3767564 1.8418671
-408.8537 -268.8188 -174.1131 -111.4615 -70.69167 -44.49577 -27.83243 -17.31853 -10.72879 -6.621463
-8257.433 -8526.252 -8700.365 -8811.827 -8882.518 -8927.014 -8954.846 -8972.165 -8982.894 -8989.515
23740.288 24244.173 24546.504 24727.902 24836.741 24902.045 24941.227 24964.736 24978.842 24987.305
15482.855 15717.921 15846.139 15916.076 15954.223 15975.031 15986.38 15992.571 15995.948 15997.79
 17 18 19
18 19 20
Year 18 Year 19 Year 20

6500 6500 6500

6000 6000 6000
500 500 500
10 10 10
5000 5000 5000
0.0075169 0.0056377 0.0042283

37.584734 28.188551 21.141413

7.4359393 5.0699586 3.45679
-30.14879 -23.11859 -17.68462
-4188.894 -4212.013 -4229.697
9887.2458 9915.4343 9936.5758
5698.3516 5703.4215 5706.8783

Year 18 Year 19 Year 20

3000 3000 3000

1500 1500 1500
1500 1500 1500
4 4 4
6000 6000 6000
7.629E-06 3.815E-06 1.907E-06

0.0457764 0.0228882 0.0114441

0.0090566 0.0041166 0.0018712
-0.03672 -0.018772 -0.009573
-999.9618 -999.9805 -999.9901
1999.9542 1999.9771 1999.9886
999.99245 999.99657 999.99844

Year 18 Year 19 Year 20

7500 7500 7500

6000 6000 6000
1500 1500 1500
20 20 20
30000 30000 30000
0.0001693 0.0001016 6.094E-05

5.0779978 3.0467987 1.8280792

1.0046548 0.5479935 0.2989056
-4.073343 -2.498805 -1.529174
-8993.589 -8996.087 -8997.617
14992.383 14995.43 14997.258
5998.7944 5999.3424 5999.6413

Year Year Year

4000 4000 4000

 3000 3000 3000
1000 1000 1000
1.5 1.5 1.5
1516 1517 1518
1.775E-08 6.212E-09 2.174E-09

2.691E-05 9.423E-06 3.3E-06

5.323E-06 1.695E-06 5.396E-07
-2.16E-05 -7.73E-06 -2.76E-06
-107.7645 -107.7645 -107.7645
307.98223 307.98224 307.98225
200.21778 200.21778 200.21778

Year Year Year

7500 7500 7500

6000 6000 6000
1500 1500 1500
20 20 20
30000 30000 30000
0.0001693 0.0001016 6.094E-05

5.0779978 3.0467987 1.8280792

1.0046548 0.5479935 0.2989056
-4.073343 -2.498805 -1.529174
-8993.589 -8996.087 -8997.617
24992.383 24995.43 24997.258
15998.794 15999.342 15999.641
Q1 Which is the most attractive customer segment for MBC to target?

A1 Elite ball player acquired using a party is the most attractive customer segment as the cumu
r segment as the cumulative NPV is the highest at ¥ 5289
OLD

Little Leaguers
Contact Cost 1000
Response Rate 0.1
Acquisition Cost 10000

Little Leaguers
Workers Needed 2
Worker Labor Cost 1500
Instructors Needed 1
Instructor Hourly Labor Cost 3000
Total Cost Per Hour 6000

Hourly Price Charged 6500

Hourly Margin ¥ 500
Hourly Margin % 8.3333333333
Annual Hours 10
Annual Margin ¥ 5000

NEW

Little Leaguers
Contact Cost 600
Response Rate 0.08
Acquisition Cost 7500

Little Leaguers
Workers Needed 2
Worker Labor Cost 1500
Instructors Needed 1
Instructor Hourly Labor Cost 3000
Total Cost Per Hour 6000

Hourly Price Charged 6500

Hourly Margin ¥ 500
Hourly Margin % 8.3333333333
Annual Hours 10
Annual Margin ¥ 5000
NEW 0 1 2 3 4 5
1 2 3 4 5 6
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Little Leaguers
Hourly Revenues 6500 6500 6500 6500 6500 6500
Hourly Costs 6000 6000 6000 6000 6000 6000
Hourly Margin 500 500 500 500 500 500
# of Annual Hours 10 10 10 10 10 10
Annual Margin ¥ 5000 5000 5000 5000 5000 5000
Survival Rate 1 0.65 0.4225 0.274625 0.1785063 0.1160291
Customer Acquisition Cost 7500
Annual Profit -2500 3250 2112.5 1373.125 892.53125 580.14531
NPV of Annual Profit -2500 2954.5455 1745.8678 1031.6491 609.61085 360.2246
-295.45455 -366.63223 -341.47586 -282.9204 -219.92072
-662.08678 -1003.5626 -1286.483 -1506.4038
Cumulative Profit to Date -2500 750 2862.5 4235.625 5128.1563 5708.3016
NPV of Cumulative Profit to Date -2500 454.54545 2200.4132 3232.0624 3841.6732 4201.8978
 6 7 8
7 8 9
Year 7 Year 8 Year 9

6500 6500 6500

6000 6000 6000
500 500 500
10 10 10
5000 5000 5000
0.0754189 0.0490223 0.0318645

377.09445 245.11139 159.32241

212.85999 125.7809 74.325078
-164.23447 -119.33049 -84.997328
-1670.6382 -1789.9687 -1874.966
6085.396 6330.5074 6489.8298
4414.7578 4540.5387 4614.8638
BEFORE
Elite Ballplayers (Print Ad)
Contact Cost 300
Response Rate 0.005
Acquisition Cost 60000

Elite Ballplayers (Print Ad)

Workers Needed 1
Worker Labor Cost 1500
Instructors Needed 1
Instructor Hourly Labor Cost 4500
Total Cost Per Hour 6000

Hourly Price Charged 7500

Hourly Margin ¥ 1500
Hourly Margin % 25
Annual Hours 20
Annual Margin ¥ 30000

Retention 0.6
Interest 0.1

BEFORE

Elite Ballplayers (Print Ad) Year 1

Hourly Revenues 7500

Hourly Costs 6000
Hourly Margin 1500
# of Annual Hours 20
Annual Margin ¥ 30000
Survival Rate 1
Customer Acquisition Cost 60000
Annual Profit -30000
NPV of Annual Profit -30000

Cumulative Profit to Date -30000

NPV of Cumulative Profit to Date -30000
AFTER
Year 1
Elite Ballplayers (Print Ad)
Hourly Revenues 7500
Hourly Costs 6000
Hourly Margin 1500
# of Annual Hours 20
Annual Margin ¥ 20000
Survival Rate 1
Customer Acquisition Cost 60000
Annual Profit -40000
NPV of Annual Profit -40000

Cumulative Profit to Date -40000

NPV of Cumulative Profit to Date -40000

BEFORE 0

Year 1
Elite Ballplayers (Party)
Hourly Revenues 7500
Hourly Costs 6000
Hourly Margin 1500
# of Annual Hours 20
Annual Margin ¥ 30000
Survival Rate 1
Customer Acquisition Cost 50000
Annual Profit -20000
NPV of Annual Profit -20000

Cumulative Profit to Date -20000

NPV of Cumulative Profit to Date -20000
AFTER
Year 1
Elite Ballplayers (Party)
Hourly Revenues 7500
Hourly Costs 6000
Hourly Margin 1500
# of Annual Hours 20
Annual Margin ¥ 20000
Survival Rate 1
Customer Acquisition Cost 50000
Annual Profit -30000
NPV of Annual Profit -30000

Cumulative Profit to Date -30000

NPV of Cumulative Profit to Date -30000
 AFTER
Elite Ballplayers (Party)
12500 Contact Cost
0.25 Response Rate
50000 Acquisition Cost

Elite Ballplayers (Party)

1 Workers Needed
1500 Worker Labor Cost
1 Instructors Needed
4500 Instructor Hourly Labor
6000 Total Cost Per Hour

7500 Hourly Price Charged

1500 Hourly Margin ¥
25 Hourly Margin %
20 Annual Hours
30000 Annual Margin ¥

0.6

0 1 2 3 4 5 6

Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

7500 7500 7500 7500 7500 7500 7500

6000 6000 6000 6000 6000 6000 6000
1500 1500 1500 1500 1500 1500 1500
20 20 20 20 20 20 20
30000 30000 30000 30000 30000 30000 30000
0.6 0.36 0.216 0.1296 0.07776 0.046656 0.0279936

18000 10800 6480 3888 2332.8 1399.68 839.808

16363.6363636364 8925.6198 4868.5199 2655.5563 1448.4853 790.08287 430.95429
-1636.3636363636 -1874.3802 -1611.4801 -1232.4437 -884.31474 -609.59713 -408.85371
-3510.7438 -5122.2239 -6354.6676 -7238.9823 -7848.5794 -8257.4332
-12000 -1200 5280 9168 11500.8 12900.48 13740.288
-13636.3636363636 -4710.7438 157.77611 2813.3324 4261.8177 5051.9006 5482.8548
Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

7500 7500 7500 7500 7500 7500 7500

6000 6000 6000 6000 6000 6000 6000
1500 1500 1500 1500 1500 1500 1500
20 20 20 20 20 20 20
20000 20000 20000 20000 20000 20000 20000
0.75 0.5625 0.421875 0.3164063 0.2373047 0.1779785 0.1334839

15000 11250 8437.5 6328.125 4746.0938 3559.5703 2669.6777

13636.3636363636 9297.5207 6339.2186 4322.1945 2946.9508 2009.2846 1369.9668
-1363.6363636364 -1952.4793 -2098.2814 -2005.9305 -1799.1429 -1550.2857 -1299.7109
-3316.1157 -5414.3971 -7420.3275 -9219.4705 -10769.756 -12069.467
-25000 -13750 -5312.5 1015.625 5761.7188 9321.2891 11990.967
-26363.6363636364 -17066.116 -10726.897 -6404.7025 -3457.7517 -1448.4671 -78.500291

1 2 3 4 5 6 7

Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

7500 7500 7500 7500 7500 7500 7500

6000 6000 6000 6000 6000 6000 6000
1500 1500 1500 1500 1500 1500 1500
20 20 20 20 20 20 20
30000 30000 30000 30000 30000 30000 30000
0.6 0.36 0.216 0.1296 0.07776 0.046656 0.0279936

18000 10800 6480 3888 2332.8 1399.68 839.808

16363.6363636364 8925.6198 4868.5199 2655.5563 1448.4853 790.08287 430.95429
-1636.3636363636 -1874.3802 -1611.4801 -1232.4437 -884.31474 -609.59713 -408.85371
-3510.7438 -5122.2239 -6354.6676 -7238.9823 -7848.5794 -8257.4332
-2000 8800 15280 19168 21500.8 22900.48 23740.288
-3636.3636363636 5289.2562 10157.776 12813.332 14261.818 15051.901 15482.855
Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

7000 7000 7000 7000 7000 7000 7000

6000 6000 6000 6000 6000 6000 6000
1000 1000 1000 1000 1000 1000 1000
20 20 20 20 20 20 20
20000 20000 20000 20000 20000 20000 20000
0.75 0.5625 0.421875 0.3164063 0.2373047 0.1779785 0.1334839

15000 11250 8437.5 6328.125 4746.0938 3559.5703 2669.6777

13636.3636363636 9297.5207 6339.2186 4322.1945 2946.9508 2009.2846 1369.9668
-1363.6363636364 -1952.4793 -2098.2814 -2005.9305 -1799.1429 -1550.2857 -1299.7109
-3316.1157 -5414.3971 -7420.3275 -9219.4705 -10769.756 -12069.467
-15000 -3750 4687.5 11015.625 15761.719 19321.289 21990.967
-16363.6363636364 -7066.1157 -726.89707 3595.2975 6542.2483 8551.5329 9921.4997
Elite Ballplayers (Print Ad) Elite Ballplayers (Party)
300 12500
0.005 0.25
60000 50000

Elite Ballplayers (Print Ad) Elite Ballplayers (Party)

1 1
1500 1500
1 1
4500 4500
6000 6000

7000 7500
1000 1500
0.14 0.14
20 20
20000 20000

0.75 0.75
0.1

7 8 9 10 11 12

Year 9 Year 10 Year 11

7500 7500 7500

6000 6000 6000
1500 1500 1500
20 20 20
30000 30000 30000
0.01679616 0.010077696 0.0060466

503.8848 302.33088 181.39853

235.0659779755 128.2178061685 69.936985
-268.8188220245 -174.1130738315 -111.4615
-8526.2519735706 -8700.3650474021 -8811.827
14244.1728 14546.50368 14727.902
5717.9208264294 5846.1386325979 5916.0756
Year 9 Year 10 Year 11 Year 12 Year 13 Year 14

7500 7500 7500 7500 7500 7500

6000 6000 6000 6000 6000 6000
1500 1500 1500 1500 1500 1500
20 20 20 20 20 20
20000 20000 20000 20000 20000 20000
0.100112915 0.0750846863 0.0563135 0.0422351 0.0316764 0.0237573

2002.2583007813 1501.6937255859 1126.2703 844.70272 633.52704 475.14528

934.0682744007 636.8647325459 434.22595 296.06315 201.86124 137.63266
-1068.1900263806 -864.82899304 -692.0443 -548.6396 -431.6658 -337.5126
-13137.6571142291 -14002.4861072692 -14694.53 -15243.17 -15674.84 -16012.35
13993.2250976563 15494.9188232422 16621.189 17465.892 18099.419 18574.564
855.5679834271 1492.432715973 1926.6587 2222.7218 2424.5831 2562.2157

8 9 10 11 12 13

Year 9 Year 10 Year 11

7500 7500 7500

6000 6000 6000
1500 1500 1500
20 20 20
30000 30000 30000
0.01679616 0.010077696 0.0060466

503.8848 302.33088 181.39853

235.0659779755 128.2178061685 69.936985
-268.8188220245 -174.1130738315 -111.4615
-8526.2519735706 -8700.3650474021 -8811.827
24244.1728 24546.50368 24727.902
15717.9208264294 15846.1386325979 15916.076
Year 9 Year 10 Year 11 Year 12 Year 13 Year 14

7000 7000 7000 7000 7000 7000

6000 6000 6000 6000 6000 6000
1000 1000 1000 1000 1000 1000
20 20 20 20 20 20
20000 20000 20000 20000 20000 20000
0.100112915 0.0750846863 0.0563135 0.0422351 0.0316764 0.0237573

2002.2583007813 1501.6937255859 1126.2703 844.70272 633.52704 475.14528

934.0682744007 636.8647325459 434.22595 296.06315 201.86124 137.63266
-1068.1900263806 -864.82899304 -692.0443 -548.6396 -431.6658 -337.5126
-13137.6571142291 -14002.4861072692 -14694.53 -15243.17 -15674.84 -16012.35
23993.2250976562 25494.9188232422 26621.189 27465.892 28099.419 28574.564
10855.5679834271 11492.432715973 11926.659 12222.722 12424.583 12562.216
13 14
Year 15

7500
6000
1500
20
20000
0.0178179

356.35896
93.840452
-262.5185
-16274.87
18930.923
2656.0562

14
Year 15

7000
6000
1000
20
20000
0.0178179

356.35896
93.840452
-262.5185
-16274.87
28930.923
12656.056
BEFORE

Elite Ballplayers (Party)

Contact Cost 12500
Response Rate 0.25
Acquisition Cost 50000

Elite Ballplayers (Party)

Workers Needed 1
Worker Labor Cost 1500
Instructors Needed 1
Instructor Hourly Labor Cost 4500
Total Cost Per Hour 6000

Hourly Price Charged 7500

Hourly Margin ¥ 1500
Hourly Margin % 25
Annual Hours 20
Annual Margin ¥ 30000

Retention 0.75
Interest 0.1

BEFORE 0 1

Year 1 Year 2
Elite Ballplayers (Party)
Hourly Revenues 7500 7000
Hourly Costs 6000 6000
Hourly Margin 1500 1000
# of Annual Hours 20 20
Annual Margin ¥ 20000 20000
Survival Rate 1 0.75
Customer Acquisition Cost 50000
Annual Profit -30000 15000
NPV of Annual Profit -30000 13636.364
-1363.6364

Cumulative Profit to Date -30000 -15000

NPV of Cumulative Profit to Date -30000 -16363.636

AFTER
Elite Ballplayers (Party)
Year 1 Year 2

Hourly Revenues 7500 7000

Hourly Costs 6000 6000
Hourly Margin 1500 1000
# of Annual Hours 20 20
Annual Margin ¥ 30000 30000
Survival Rate 1 0.6
Customer Acquisition Cost 43103
Baseball Bat Giveway 10000
Annual Profit -23103 18000
NPV of Annual Profit -23103 16363.636
-1636.3636

Cumulative Profit to Date -23103 -5103

NPV of Cumulative Profit to Date -23103 -6739.3636
AFTER

Elite Ballplayers (Party)

Contact Cost 12500
Response Rate 0.29
Acquisition Cost 43103.448

Elite Ballplayers (Party)

Workers Needed 1
Worker Labor Cost 1500
Instructors Needed 1
Instructor Hourly Labor Cost 4500
Total Cost Per Hour 6000

Hourly Price Charged 7500

Hourly Margin ¥ 1500
Hourly Margin % 25
Annual Hours 20
Annual Margin ¥ 30000

Retention 0.6
Interest 0.1

2 3 4 5 6 7 8

Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

7000 7000 7000 7000 7000 7000 7000

6000 6000 6000 6000 6000 6000 6000
1000 1000 1000 1000 1000 1000 1000
20 20 20 20 20 20 20
20000 20000 20000 20000 20000 20000 20000
0.5625 0.421875 0.31641 0.2373047 0.1779785156 0.1334839 0.1001129

11250 8437.5 6328.13 4746.0938 3559.5703125 2669.6777 2002.2583

9297.5207 6339.2186326071 4322.19 2946.9508 2009.2846435996 1369.9668 934.06827
-1952.4793 -2098.2813673929 -2005.93 -1799.1429 -1550.2856689004 -1299.7109 -1068.19
-3316.1157 -5414.3970698723 -7420.33 -9219.4705 -10769.7561559278 -12069.467 -13137.657
-3750 4687.5 11015.6 15761.719 19321.2890625 21990.967 23993.225
-7066.1157 -726.8970698723 3595.3 6542.2483 8551.5329065722 9921.4997 10855.568

Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

7000 7000 7000 7000 7000 7000 7000

6000 6000 6000 6000 6000 6000 6000
1000 1000 1000 1000 1000 1000 1000
20 20 20 20 20 20 20
30000 30000 30000 30000 30000 30000 30000
0.36 0.216 0.1296 0.07776 0.046656 0.0279936 0.0167962

10800 6480 3888 2332.8 1399.68 839.808 503.8848

8925.6198 4868.5199098422 2655.56 1448.4853 790.0828704177 430.95429 235.06598
-1874.3802 -1611.4800901578 -1232.44 -884.31474 -609.5971295823 -408.85371 -268.81882
-3510.7438 -5122.2238918106 -6354.67 -7238.9823 -7848.5794445012 -8257.4332 -8526.252
5697 12177 16065 18397.8 19797.48 20637.288 21141.173
2186.2562 7054.7761081894 9710.33 11158.818 11948.9005554988 12379.855 12614.921
 9 10 11 12 13 14 15

Year 10 Year 11 Year 12 Year 13 Year 14 Year 15

7000 7000 7000 7000 7000 7000

6000 6000 6000 6000 6000 6000
1000 1000 1000 1000 1000 1000
20 20 20 20 20 20
20000 20000 20000 20000 20000 20000
0.0750847 0.0563135 0.0422351 0.0316764 0.0237573 0.0178179

1501.6937 1126.2703 844.70272 633.52704 475.14528 356.35896

636.86473 434.22595 296.06315 201.86124 137.63266 93.840452
-864.82899 -692.04434 -548.6396 -431.6658 -337.5126 -262.5185
-14002.486 -14694.53 -15243.17 -15674.84 -16012.35 -16274.87
25494.919 26621.189 27465.892 28099.419 28574.564 28930.923
 11492.433 11926.659 12222.722 12424.583 12562.216 12656.056

Year 10 Year 11

7000 7000
6000 6000
1000 1000
20 20
30000 30000
0.0100777 0.0060466

302.33088 181.39853
128.21781 69.936985
-174.11307 -111.46154
-8700.365 -8811.8266
21443.504 21624.902
12743.139 12813.076
Exhibit 1 Hilton Hotels' Brand Portfolio (September 2007)

Properties Rooms
Brand Owned Managed Franchised Owned Managed Franchised
Waldorf=Astoria Collection 2 4- 1413 2353 -
Conrad International - 14 4- 5024 1026
Hilton Hotels 18 75 198 17044 37307 57748
Hilton International 27 181 19 6602 56595 5164
Embassy Suites 2 72 112 443 19217 25912
Doubletree Hotels 3 26 106 1349 8654 27706
Doubletree Guest Suites - 11 21 - 2748 4045
Club Hotels - 4 9- 743 1416
Hilton Garden Inns 1 11 323 162 1519 44382
Homewood Suites - 41 168 - 4689 18274
Hampton Inn - 16 1110 - 2128 107324
Hampton Inns & Suites 1 7 320 133 799 33298
Totals 54 462 2390 27146 141776 326295
Grand Total 2906 495217

Source: Hilton Hotels Corporation.

Company Hotels Countries

Wyndham Hotel Group 6441 55
Choice Hotels International 5376 40
Accor 4121 90
InterContinental Hotels Group (IHG) 3741 100
Hilton Hotels Corp. 2,9358 78
Marriott International 2832 68
Carlson Hospitality Worldwide 945 70
Starwood Hotels & Resorts Worldwide 871 95
Global Hyatt Corp. 749 44

Source: Adapted from HOTELS' Giants Survey 2007.

Exhibit 2 Revenue and Competitive Measures by Brand by Year

Brand 2001 2002 2003 2004 2005 2006

Waldorf=Astoria Collection
Room Revenue 258566213 262579537 261159914 289401766 327954076 351124552
ADR 266 258 254 280 330 321
RevPAR 191 193 192 212 24 258
RevPAR Index 111.3 115.2 115.2 110.9 111.8 111.4
Conrad International
Room Revenue 5616630 12825487 13922405 16488158 24366171 34027356
ADR n/a n/a n/a 171 183 224
RevPAR 89 113 123 110 128 129
RevPAR Index 75.6 109.3 106.9 94 90.5 87.6
Hilton Hotels
Room Revenue 2565871863 2524306671 2471302966 2735158951 3030171471 3334146538
ADR 149 126 125 128 138 149
RevPAR 87 84 82 88 97 105
RevPAR Index 105 107.1 105.4 104.8 104.7 104.8
Embassy Suites
Room Revenue 1144363987 1157211744 1179835300 1257964968 1394893681 1581927594
ADR 128 121 120 122 129 140
RevPAR 86 84 83 87 94 104
RevPAR Index 125.7 127.4 127.4 124.6 122.9 124.5
Doubletree
Room Revenue 1023606672 979070676 945420658 1004739271 1121483568 1256007772
ADR 107 102 100 101 112 120
RevPAR 69 64 62 70 78 84
RevPAR Index 100.3 99.6 98.2 96.9 98.2 100.2
Hilton Garden Inn
Room Revenue 368690111 452214782 530041491 670149975 826184629 1045893961
ADR 102 97 96 100 106 114
RevPAR 63 60 61 67 72 79
RevPAR Index 100.6 105.3 110.9 110.1 109.5 111.6
Homewood Suites
Room Revenue 284551565 309372646 337024482 390840322 469776634 566941625
ADR 99 95 95 97 103 110
RevPAR 69 67 66 71 76 81
RevPAR Index 117.7 120.1 121.7 118.9 114.1 114.4
Hampton Brand
Room Revenue 1787503581 1956857911 2089455624 2379156479 2770369803 3208908869
ADR 78 79 80 83 89 96
RevPAR 52 52 52 57 63 69
RevPAR Index 113.6 116.6 117.1 117.7 120 121.6

Source: Hilton Hotels Corporation.

Total ADR 929 878 870 911 1007 1050

Average ADR 132.7142857143 125.4285714286 124.2857142857 130.1428571429 143.8571428571 150
Exhibit 7 Aggregate US Hilton Reservation Contact Centers Volume

Call Center Data Total Calls Net Revenue per Call9 Conversion Ratio10
2001 24824937 73.09 0.38
2002 24864291 77.64 0.391
2003 24282151 84.39 0.409
2004 25803572 85.57 0.41
2005 27475261 90.3 0.409
2006 27421289 99.29 0.415
2007 28626204 102.55 0.414

Source: Hilton Hotels Corporation.

2001 2002
Investment 0 1650000
NPV of Investment 0 1500000
Increase Conversion ratio ROI Revenue Cumulative Revenue
689492765.2254
0.011 12.869757 754811249.31684 1444304014.54224
0.018 36.885073 838110825.66201 2282414840.20425
0.001 2.2080117 905284778.9764 3187699619.18065
-0.001 -2.481016 1014735571.9347 4202435191.11535
0.006 16.335959 1129903810.69615 5332339001.8115
-0.001 -2.935617 1215345529.1628 6547684530.9743

62.882167

2003 2004 2005 2006 2007

1000000 1000000 1000000 1000000 1000000
826446.280991735 751314.8 683013.46 620921.323059155 564473.930053777
Cumulative InvestmROI over liCall center EfADR Average ADR

1650000 875.33577 0.062252018 929 132.71429

2650000 861.28862 0.092351895 878 125.42857
3650000 873.34236 0.016144479 870 124.28571
4650000 903.7495 0.064714735 911 130.14286
5650000 943.77681 0.122999042 1007 143.85714
6650000 984.61422 0.044602545 1050 150

Total Investment
6650000
4946170