.

END-TERM
Spreadsheet Modelling in Business Analytics
Time: 150 minutes Marks -60
Instructions:
1) Q2 is compulsory. Answer any two from the rest.
2) Answer all sub-questions of a question continuously.
3) Show all your calculations leading to the answer.
4) You may make suitable assumptions, if required and clearly state them

Q1. Advertising Model_ Purchasing television ads

Generally, companies spend enormous amount of money to advertise their products. They
also want to ensure that they are spending their money wisely. The main objective is to reach
large no. of various groups of potential customers and to keep their advertising costs as low
as possible.
The General Flakes Company sells a brand of low-fat breakfast cereal that appeals to people
of all age groups and both genders. The company advertises his cereal in a variety of 30-
second television ads, and these ads can be placed in a variety of television shows. The ads in
different shows vary by cost—some 30-second slots are much more expensive than others—
and by the types of viewers they are likely to reach. The company has segmented the potential
viewers into six mutually exclusive categories: males aged 18 to 35, males age 36 to 55, males
over 55, females age 18 to 35, females age 36 to 55 and females over 55. A rating service can
supply data on the numbers of viewers in each of these categories who will watch a 30-second
ad on any particular television show. Each such viewer is called an exposure. The company
has determined the required no. of exposures it wants to obtain for each group. It wants to
know how many ads to place on each of several television shows to obtain these required
exposures at minimum costs. The data on costs per ad, number of exposures per ad and
minimal required exposures are listed in the table given below, where no. of exposures is
expressed in millions and costs are in thousands of dollars.
 Viewer Desperate Monday The Sport The Life CNN Law& Minimal
group/TVshow House night Simpsons Center Real time Order Required
wives Football world( Evening SVU Exposure
MTV) Movie
Men 18-35 5 6 5 0.5 0.7 0.1 0.1 3 60
Men 36-55 3 5 2 0.5 0.2 0.1 0.2 5 60
Men over 55 1 3 0 0.3 0 0 0.3 4 28
Women 18-35 6 1 4 0.1 0.9 0.6 0.1 3 60
Women 36-55 4 1 2 0.1 0.1 1.3 0.2 5 60
Women 2 1 0 0 0 0.4 0.3 4 28
over55
Cost per Ad 140 100 80 9 13 15 8 140

i) Find the Optimum output.

ii) Find the sensitivity report and interpret the output. [20 Marks]
Q2. XYZ paint company identified the attributes of their product which are important to their
customers and classified each of the attributes into their levels. There are 4 attributes each having
2 levels. The important attributes and its levels identified are:
a) Life: No.of years the paint coat lasts.
b) Price: the price of 1 litre of paint
c) Colour: the colour of the paint
d) Waterproof
The levels of the above-mentioned attributes are as follows:
Life: 4years, 5 years
Price: Rs 60 per litre, Rs 70 per litre
Colour: Green, Cream
Waterproof: Yes, No
The company wants to understand the potential customer’s point of view and how important
each attribute and each level to him. The company also wants to know how much utility the
customer derives from a given combination of these levels of attributes.
They surveyed 200 customers. The customers were introduced with all possible combination of
attributes and levels and were asked to choose one amongst them. The customer preferences are
as follows:

i) 50 people choose 5years of life, Rs60 Price, Green colour and waterproof(yes)
ii) 40 people choose 5years of life, Rs70 Price, cream colour and waterproof(yes)
iii) 10 people choose 5years of life, Rs70 Price, Green colour, and No waterproof
iv) 60 people choose 4years of life, Rs60 Price, Cream colour and No waterproof
v) 40 people choose 4years of life, Rs60 Price, Green colour, and No waterproof

Develop i) a discrete choice model to answer the queries, XYZ company has, ii) Check the
goodness-of-fit of the model and interpret the output. [20 Marks]

Q3. For ABC Company the following information is given.

No.of clients: 2875

Orders/client: 1.85
Average order value: 35
Gross Margin: 70%
Retention Rate: 85%
Calculate
i) Customer lifetime value
ii) Assuming a time period of 25 years, find total gross profit (from gross profit of 25
years) and find the Customer lifetime value. [20 Marks]

Q4. A start-up company wants to estimate the multiplier (how many times of profit a customer
generates over the 1st year profit if he/she continues for certain time period).
The assumptions are:
Discount rate: 12%
Retention Rate: 85%
1st Year customer base: 15,000
Profit per customer (yearly): Rs 5400
Time Period: 15 years

Based on the following assumptions find a) the multiplier, b) find the multipliers when discount
rates are: 0.2,0.3,0.4,0.5 and the retention rates are 0.80,0.85,0.90,0.95. [20 Marks]

Q5. How much a Loyal Customer Worth to a Company: A manufacturing company wants to
estimate the net present value (NPV) of a typical customer that can stay with the company for
few years. The company currently experience a retention rate of 80% and the discount rate is
10%. The average profit generated from a customer follows a normal distribution with mean
(historical data given below for 15 years) and standard deviation 8% of mean.
The historical data is as follows:
YEAR 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Average
Profit -53 61 74 80 86 93 98 101 127 135 139 141 156 159 161

Estimate i) NPV and Average years of Loyalty using the available information, performing a
simulation model. ii) Find average NPV for different retention rate: 0.8,0.85,0.90,0.95 bu
simulating it 10,000 times. [20 Marks]

----------All the Very Best----------