1 | Number of Users: | |||||||
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2 | There have been over 100 million iPhones sold as of March 2011, and we assume that around 75% of these people live near a Starbucks. Of these people, maybe 25% actually drink starbucks. Not everybody who owns an iPhone and drinks starbucks will download this application, maybe about 5% at first, but we would like to see the number grow as the app increases in popularity. After some calculations, we believe that we would have about 900,000 users of the application. | |||||||
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8 | Costs (for Starbucks): | |||||||
9 | Mobile Application developer | $8,000 | ||||||
10 | Project Manager | $10,000 | ||||||
11 | Site Maintenance | $1000 / yr | ||||||
12 | Online order in-store system | $3,000,000 | (10,000 stores (estimated to implement) x $300 system) | |||||
13 | System maintenance | $10,000 / yr | ||||||
14 | Training employees: | $200,000 | ||||||
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18 | Profitability: | |||||||
19 | We plan on giving the app away for free, because we believe that over time this will boost sales at Starbucks and bring more people into the stores. We believe that with the release of this app, we will see an increase in sales that corresponds with the number of people who download it. Just because somebody downloads the application does not meant that they will begin drinking Starbucks more, but we do think that abaout half of the people who download the application will come in more often due to the ablility to skip lines. The average price of an order through the application will be approximately $5, and with an estimated 500,000 people using this app in the first year, we believe that Starbucks will see an increase in 2.5 million dollars the initial year of the application's release. We expect this amount to rise as the application becomes better known and more popular. | |||||||
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33 | Cost Benefit Analysis: | |||||||
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35 | Benefits | Year 0 | 1 | 2 | 3 | 4 | 5 | Totals |
36 | Net Benefits | $0.00 | $2,500,000.00 | $3,000,000.00 | $3,500,000.00 | $4,000,000.00 | $5,000,000.00 | |
37 | Discount Rate (12%) | $1.00 | $0.89 | $0.80 | $0.71 | $0.64 | $0.57 | |
38 | Benefit PV per period | $0.00 | $2,232,142.86 | $2,391,581.63 | $2,491,230.87 | $2,542,072.31 | $2,837,134.28 | $12,494,161.95 |
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40 | Cumulative benfit PV | $0.00 | $2,232,142.86 | $4,623,724.49 | $7,114,955.36 | $9,657,027.67 | $12,494,161.95 | |
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43 | Costs | ($3,218,000.00) | ||||||
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45 | Recurring Costs | ($11,000.00) | ($11,000.00) | ($11,000.00) | ($11,000.00) | ($11,000.00) | ($11,000.00) | |
46 | Discount Rate (12%) | $1.00 | $0.89 | $0.80 | $0.71 | $0.64 | $0.57 | |
47 | Cost PV per period | ($3,218,000.00) | ($9,821.43) | ($8,769.13) | ($7,829.58) | ($6,990.70) | ($6,241.70) | ($3,257,652.54) |
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49 | Cumulative cost PV | ($3,218,000.00) | ($3,227,821.43) | ($3,236,590.56) | ($3,244,420.14) | ($3,251,410.84) | ($3,257,652.54) | |
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51 | Overall NPV | $9,236,509.41 | ||||||
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54 | Overal ROI | 284% | ||||||
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57 | Breakeven Analysis | Year 0 | 1 | 2 | 3 | 4 | 5 | |
58 | Yearly NPV Cash Flow | ($3,218,000.00) | $2,222,321.43 | $2,382,812.50 | $2,483,401.28 | $2,535,081.61 | $2,830,892.58 | |
59 | Cumulative NPV Cash Flow | ($3,218,000.00) | ($995,678.57) | $1,387,133.93 | $3,870,535.21 | $6,405,616.83 | $9,236,509.41 | |
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61 | Breakeven occurred at 1.72 years | |||||||
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