The 19th Hole

Prediction based on models

Month Price Demand Price (x) Linear Power
1 450 45 450 51.7 50.9
2 300 103 300 104.9 110.2
3 440 49 440 55.3 53.1
4 360 86 360 83.7 77.9
5 290 125 290 108.5 117.6
6 450 52 450 51.7 50.9
7 340 87 340 90.7 86.8
8 370 68 370 80.1 73.9
9 500 45 500 34.0 41.6
10 490 44 490 37.6 43.2
11 430 58 430 58.8 55.5
12 390 68 390 73.0 66.8

Linear:- mx+b Power:- y=ax^b

Interception (b): 211.31 Constant a: 5871064
Slope (m): -0.3546 Exponent b: -1.908

Price vs Demand
140

120
f(x) = 5871064.20312913 x^-1.90815375508878
100 f(x)
f(x) == 466.510119229519 exp(
− 0.354631204577084 x +− 211.314674501314
0.00491060734945113 x )

80
Demand

60

40

20

0
250 300 350 400 450 50
Price
d on models Absolute Percent Error
Exponential Demand Linear Power Exponential
49.2 45 15.0% 13.0% 9.3%
104.1 103 1.9% 7.0% 1.1%
51.7 49 12.8% 8.3% 5.5%
77.1 86 2.7% 9.5% 10.3%
109.4 125 13.2% 5.9% 12.5%
49.2 52 0.5% 2.2% 5.4%
85.2 87 4.3% 0.2% 2.0%
73.4 68 17.8% 8.7% 7.9%
38.3 45 24.4% 7.6% 14.9%
40.3 44 14.6% 1.7% 8.5%
54.3 58 1.4% 4.4% 6.3%
66.4 68 7.4% 1.7% 2.4%
Average 9.7% 5.9% 7.2% <--use the model with smallest error

where, e=2.718
Exponent:- y=ae^(bx)
Constant (a): 466.51
Exponent (b): -0.005

375508878
491060734945113 x )
314674501314

450 500 550

U
$ 985,104 250 300
$ 260
$ 270
$ 280
$ 290
$ 300
$ 310
$ 320
 $ 330
$ 340
$ 350
$ 360
$ 370
$ 380
$ 390
$ 400
$ 410
$ 420
$ 430
$ 440
$ 450
$ 460
$ 470
$ 480
$ 490
$ 500
$ 510
$ 520
$ 530
$ 540
$ 550
$ 560
Price

$ 570
$ 580
$ 590
$ 600
$ 610
$ 620
$ 630
$ 640
$ 650
$ 660
$ 670
$ 680
$ 690
$ 700
$ 710
$ 720
$ 730
$ 740
$ 750
$ 760
$ 770
$ 780
$ 790
$ 800
$ 810
$ 820
$ 830
$ 840
$ 850
$ 860
$ 870
$ 880
$ 890
$ 900
 Model the Business
Unit Cost: $ 250 per set of clubs
Sales Price: $ 700 <--multiple of 10
Demand (00)s: 22 <-- from power model =G22*Q5^G23
Actual Demand: 2189 =Q6*100

Cost: $ 547,280 =Q7*Q4

Revenue: $ 1,532,384.65 =Q7*Q5
Profit: $ 985,104 =Q10-Q9

e the model with smallest error Price vs Profit

$939,000
$938,000
$937,000
$936,000
$935,000
Profit

$934,000
$933,000
$932,000
$931,000
$930,000
200 300 400 500 600 700 800 900 1000
Price

Unit Cost
350 400 450 500 550
 Price Profit
$ 985,104
260
270
280
290
300
310
320
330
340
350
360
370
380
390
400
410
420
430
440
450
460
470
480
0 900 1000
490
500
510
520
530
540
550
560
570
580

590
600
610
620
630
640
650
660
670
680
690
700
710
720
730
740
750
760
770
780
790
800
810 $ 938,508
820 $ 933,220
830 $ 938,508
840 $ 933,220
850 $ 938,508
860 $ 933,220
870 $ 938,508
880 $ 933,220
890 $ 938,508
900 $ 933,220
Year Revenue (millions of USD)
2017 $218.6 Actual Data Forecasts
2018 $435.0 Year no. Revenue in Millions Power
2019 $915.0 1 218.6 $173.94
2020 $1,825.9 2 435 $573.38
2021 $4,021.8 3 915 $1,152.07
4 1825.9 $1,890.10
5 4021.8 $2,774.96
6 3582.1 $3,797.69
7 4682 $4,951.41

Power model
y=ax^b
a:
b:

Exponential model
y=ae^(bx)
a:
b:
 Forecasts Absolute Percentage Error
Exponential Power Exponential
$ 280.6429 20.43% 28.38%
$ 579.9740 31.81% 33.33%
$ 1,198.5685 25.91% 30.99%
$ 2,476.9499 3.52% 35.66%
$ 5,118.8404 31.00% 27.28%
$ 10,578.5455 6.02% 195.32%
$ 21,861.5183 5.76% 366.93%
MAPE 19.78% 58.49% <-- smallest error is more suitable

Power model

173.94
1.7209

Exponential model

135.8
0.7259
Gopher Drugs
Cash Flows
Development Cost: 9.3 millions End of Year Gross Margin ($M)
Lifetime: 20 years 1 $1.2 =B5
Year 1 margin: 1.2 millions 2 $1.32 =IF(E5<$B$6,F4+F4*$B$7,F4-F4*$B$8)
Inc through year: 8 3 $1.45 =IF(E6<$B$6,F5+F5*$B$7,F5-F5*$B$8)
Rate of increase: 10% 4 $1.60 =IF(E7<$B$6,F6+F6*$B$7,F6-F6*$B$8)
Rate of decrease; 5% 5 $1.76 =IF(E8<$B$6,F7+F7*$B$7,F7-F7*$B$8)
Discount Rate; 12% 6 $1.93 =IF(E9<$B$6,F8+F8*$B$7,F8-F8*$B$8)
7 $2.13 =IF(E10<$B$6,F9+F9*$B$7,F9-F9*$B$8
(Net) Present Value $11.85 8 $2.02 =IF(E11<$B$6,F10+F10*$B$7,F10-F10*
Development Cost: 9.3 9 $1.92 =IF(E12<$B$6,F11+F11*$B$7,F11-F11*
Net Present Value: $2.55 millions 10 $1.82 =IF(E13<$B$6,F12+F12*$B$7,F12-F12*
11 $1.73 =IF(E14<$B$6,F13+F13*$B$7,F13-F13*
12 $1.64 =IF(E15<$B$6,F14+F14*$B$7,F14-F14*
13 $1.56 =IF(E16<$B$6,F15+F15*$B$7,F15-F15*
14 $1.48 =IF(E17<$B$6,F16+F16*$B$7,F16-F16*
15 $1.41 =IF(E18<$B$6,F17+F17*$B$7,F17-F17*
16 $1.34 =IF(E19<$B$6,F18+F18*$B$7,F18-F18*
17 $1.27 =IF(E20<$B$6,F19+F19*$B$7,F19-F19*
18 $1.21 =IF(E21<$B$6,F20+F20*$B$7,F20-F20*
19 $1.15 =IF(E22<$B$6,F21+F21*$B$7,F21-F21*
20 $1.09 =IF(E23<$B$6,F22+F22*$B$7,F22-F22*
5<$B$6,F4+F4*$B$7,F4-F4*$B$8)
6<$B$6,F5+F5*$B$7,F5-F5*$B$8)
7<$B$6,F6+F6*$B$7,F6-F6*$B$8)
8<$B$6,F7+F7*$B$7,F7-F7*$B$8)
9<$B$6,F8+F8*$B$7,F8-F8*$B$8)
10<$B$6,F9+F9*$B$7,F9-F9*$B$8)
11<$B$6,F10+F10*$B$7,F10-F10*$B$8)
12<$B$6,F11+F11*$B$7,F11-F11*$B$8)
13<$B$6,F12+F12*$B$7,F12-F12*$B$8)
14<$B$6,F13+F13*$B$7,F13-F13*$B$8)
15<$B$6,F14+F14*$B$7,F14-F14*$B$8)
16<$B$6,F15+F15*$B$7,F15-F15*$B$8)
17<$B$6,F16+F16*$B$7,F16-F16*$B$8)
18<$B$6,F17+F17*$B$7,F17-F17*$B$8)
19<$B$6,F18+F18*$B$7,F18-F18*$B$8)
20<$B$6,F19+F19*$B$7,F19-F19*$B$8)
21<$B$6,F20+F20*$B$7,F20-F20*$B$8)
22<$B$6,F21+F21*$B$7,F21-F21*$B$8)
23<$B$6,F22+F22*$B$7,F22-F22*$B$8)
Year Cash Flow (at the end of the year)

1 $30,000
2 $65,000
3 $80,000
4 $75,000
5 $55,000

Initail Investment: $150,000

Discount Rate: 15%

Net Present Value: $48,063.81