I was hoping someone could help me with this conundrum as l feel like l've been spinning my wheels all day with this one. Here's the scenario and l'll try and keep it simple.
Lets say, l currently have 1.5 million subscribers a month and l get paid on a minimum guarantee (MG) of 2.1 million subscribers a month.
Those 2.1 million subscribers are broken down into 500k increments i.e.
Tier 1 0-500k l get paid £0.20 per subscriber
Tier 2 500k-1,000k l get paid £0.19 per subscriber
Tier 3 1,000k - 1,500k l get paid £0.18 per subscriber
Tier 4 1,500k - 2,000k I get paid £0.17 per subscriber
Anything above 2.1 million subscribers is incremental income (say at £0.16 per subscriber) but l'll always be paid for the MG subs no matter what.
This is my attempted logic at the formula:
IF actual subs are > MG subs then actual subs subtracted from Tier 4 subs (2,000) x cost per subscriber. (I'm subtracting actuals from the Tier 4 subs because l've already factored in the fees l'm being paid on these subscribers). IF that's not true i.e. IF actual subs are < MG subs then MG subs subtracted Tier 4 subs (2,000) x cost per subscriber.
It's tricky to explain and if l could l'd attach a spreadsheet to show you. The complexity is really having something flexible enough to handle changes to Tiers and Tier sizes as well as changes in MG levels. If you have anything better or suggestion to improve that would be a great help.
Thanks for your help,
M.
Do a table like the image
On E5 put
=(E2-VLOOKUP(E2,A:B,1,TRUE)+1)*VLOOKUP(E2,A:B,2,TRUE)+VLOOKUP(E2,A:C,3,TRUE)
The formula may vary because in portuguese they are a bit different, but I think I got it right.
since you are guaranteed the MG, the MG can be computed as
=SUMPRODUCT({500000,500000,500000,500000},{0.2,0.19,0.18,0.17})
which yield 370,000 pound sterling and will be constant.
so if you actually have x subscribers (where value x written in cell A1), you can compute additional return by
=MAX((A1-2000000)*0.16,0)
which will always yield a positive value.
So total return is the sum of the above two results.
= 370 + MAX((A1-2000000)*0.16,0)
BR~
Related
I'm trying to evaluate various tiered pricing structures (for say, electricity plans) using Excel (more-or-less) to see what costing/plan is 'optimal', given some existing usage data I have.
Consider an example 'Table of Usage & Rates' (with fictitious but easily manipulated values):-
For a daily usage value of 120, we'd have 100 (in the 1st tier) and 20 (in the 2nd tier). The amount used within a tier gets charged at a certain rate (the 'factor')... and each 'tier charge' is addded together to form a total charge for the day.
So, we can calculate:-
100 x 8 = 800 ...a part of the total
20 x 4 = 80 ...another part of the total
...and that's all, giving a total of 880.
...but how to do that in a single formula within a cell?
I've done some pretty decent explorations for a few hours today, as I can't nut out how to deal with this... and most suggestions talk about multiple =IF formulas (cumbersome and unscalable - I shouldn't need to recode cell contents if I split/add another tier)... and suggestions with =VLOOKUP just don't 'click' with me ( = I don't understand them).
I'm actually using 'PlanMaker', a component of Softmaker's 'Office 2021' product to create/maintain this spreadsheet.. and there is no VBA-like plugin available.
I'd appreciate a method of attack, if anyone can suggest something, please...
So:
=product(10,8)+product(20,4)
or if we assume Factor starts in B9 then =product(A9,B9)+product(A10,B10+product(A11,B11)
then take the sum of those results etc assuming A9 is the amount used.
You can also use:
=sumproduct(A9:A11,B9:B11)
for the same but only needs one cell. And the advantage of a lot less typing.
You can include a 3rd array in sumproduct (or as many as needed) such as a binary value to include in the calculation or not.
A business works on a subscription model basis with a expected churn rate (Cancellations) each month during year 1 at 5% & during the following year a churn rate of 2.5% due to the fact these are now established customers (long term).
A new feature or service is launched with a expect increase of subscriptions each month. I need to calculate how many subscriptions would that be in N years based on a 5% churn rate for the first 12 month & a 2.5% churn rate during year 2.
Below is currently how were are calculating this in excel however this is really in inelegant solution when trying to calculate this for say 5 - 10 year impacts.
https://i.stack.imgur.com/yF5Rx.png
Are there any accounting formulas or something mathamitcally I can produce to calculate this in a single cell? Given I would need to set the given churn rates for each year & length of time.
For ease lets say 95% of the time I would be working on a 3 year model of subscriptions & each year will need its own churn rate.
I thought perhaps something with exp & halving the value might work but have not found anything yet.
Here's one way to build the model. I'll make reference to this image:
First we set up the churn model.
Row 1: Since Churn Rates depend on subscription age, Row 1 has the subscription age (in months). This is for reference only and is not used in the calculations.
Row 2: Churn Rates.
Row 3: Since Churn Rates always enter the calculation as (1-ChurnRate), call that term (Single-month) Retention Rate. As an example, in B3 the formula is =1-B2.
Row 4: Since the effects of churn are cumulative over multiple months, we define another term Multi-month Retention Rate (abbreviated MMRR). In the first month this is set to 1; in subsequent months this is the product of previous single-month retention rates. So in C4 the formula is =B4*B3; in C5, =C4*C3, etc.
Row 5: The model as described in the Question indicated a fixed rate of new subscriptions = 100/month. When the subscription rate is fixed, it is convenient to sum up the MMRRs. So in B5 we have =B4; in C5, =B5+C4; in D5, C5+D4; etc.
At this point we're essentially done. If you multiply the values in Row 5 by any fixed rate of new subscriptions (e.g. 100/month in the original Question) we get the number of subscribers in that month. But what if you want to model where the number of new subscriptions varies month to month? Here's how ...
The basic idea is to multiply the monthly subscription rate by its age-appropriate MMRR. Note that Row 8 has varying numbers of new subscriptions (100, 110, 97) in the first 3 months. To get the total subscriptions in Mar-19 for example, we need to
multiply the 100 (Jan-19) subscriptions (that have a 2 month age) by the MMRR for a 2-month old subscription (0.9025),
multiply the 110 (Feb-19) subscriptions (that have a 1 month age) by the MMRR for a 1-month old subscription (0.95),
multiply the 97 (Mar-19) subscriptions (that have a 0 month age) by the MMRR for a 0-month old subscription (1), and
add those three products together.
This could be calculated on the worksheet by entering in D9 the formula =B8*D4+C8*C4+D8*B4. This type of calculation (sum up the pair-wise products of two arrays) is often done with Excel's SUMPRODUCT function. Here we need to take one of the arrays in reverse order, which is not directly supported by Excel. You could enter new subscriptions in reverse order, but that's an ugly kludge. Fortunately, it is do-able with a combination of the OFFSET(), COLUMN() and N() worksheet functions (see here for details). The required formula for B9 is
=SUMPRODUCT($B4:B4,N(OFFSET(B8,0,-(COLUMN($B8:B8)-COLUMN($B8)),1,1)))
This can then be copy/pasted into the rest of row 9.
This model approach is pretty flexible: the churn rates (row 2) and subscription rates (row 8) can both be varied month to month; the total number of retained monthly subscriptions is calculated automatically.
The case:
Let us say a company is a monopolist in the market, and the supply of products is 100% met by demand every week. All (variable and fixed) costs are set. Based on estimations I have weekly units produced. In addition, the average price throughout the year has to hit approximately X. It is preferrable that the monthly results don't vary too much from break even. How can I quickly set the weekly price for the company’s product so that the company breaks even (Result = approx. 0), and at the same time keep the weekly price at the most stable price possible (as close to average as possible every week).
I have tried to use solver to minimize STD.DEV of prices (also tried skewness), with constraints that the average price is X and estimated result = 0, by changing the weekly prices throughoutthe year. However, this results in a few weeks of extreme price differences, which is the opposite of what I need.
Do somebody have a possible solution to the problem?
You could try the following:
minimize maxp - minp
maxp >= p(w) for all w
minp <= p(w) for all w
This will try to minimize the bandwidth (and additionally is completely linear)
I thought I was reasonably sharp when it comes to avoiding circular references in excel but this time am truly stuck. I have lost alot of hair over this ...
This is a simple government subsidy exercise. Users pay the government for gas. First tier of consumption is free. Second tier is subsidized. Government provides a lump contribution ($4,263m). Anything left after Revenue + Subsidy - Expenditure (for all tiers) is used to subsidize tariff of second tier.
Remaining contribution is divided by volume of demand for Tier two, and then subtracted from the tier two tariff ($15/tonne) Tier three revenue is fixed to make things simple.
I have structured the model per the image below. You can see all the formulas I have used. All rows that are not yellow are hard coded, therefore no formulas in these. I have enabled iterative calculations ... but excel just keeps on spitting wrong answers. Can someone please tell me where I am going wrong and how to solve this issue? :) Is there for example a way I can rewrite the 'subsidy available from contribution' formula to avoid the circularity?
The issue is that you should be calculating the "Tier 2 subsidized tariff" as an output - it shouldn't be an input in your calculation. Instead of the total 'funding from operations' in this calculaton you need to have a 'Tier 1 and 3 funding.' The amount of money still needed to cover operating costs will be the total revenue from Tier 2, and divide this by the Tier 2 volumne to get your $/tonne.
Formulas:
Screenshot with formulas shown
Results:
Screenshot with calculated values
If there is a chance that you'll have more revenue from Tier 3 than needed to cover all costs, you might add an 'if' statement to this to make sure your tier 2 cost doesn't go below 0.
you don't need to use formula to determine "tariff rebate". circular reference is telling you that you are dealing with x=x situation here. so if you replace numbers with variable names you end up with calculating "Subsidy Available from Contribution" without need of tariff rebate. Here is what I came up with:
I'm trying to calculate a lifetime value of a customer. Let's assume a new customer pays $100K per year and stays for 5 years. Let's discount any future years' payments with 10% rate.
This is manual calculation:
Year 1 $100,000.00
Year 2 $90,000.00
Year 3 $81,000.00
Year 4 $72,900.00
Year 5 $65,610.00
---------------------
Total $409,510.00
I can get the same value by using FV with negative rate.
FV(-0.1,5,-100000,0,0) = $409,510.00
What I'm trying to do is to get the same value using PV. And it's not exactly the same:
PV(0.1,5,-100000,0,1) = $416,986.54
I'm not sure what am I missing here. Does MS Office Excel 2010 PV understand discounting differently?
If you calculate out what PV is doing manually, the formula is actually this, for each individual year:
=Base Amount / (1 + Discount Rate) ^ Periods
Vs what FV is doing manually, the formula is this (which you seem to know based on coming to the same answer in your data):
=Base Amount * (1 - Discount Rate) ^ Periods
The reason for the difference in calculation is the mathematical difference between the two items - for background see here: http://www.investopedia.com/walkthrough/corporate-finance/3/time-value-money/future-value.aspx and here: http://www.investopedia.com/walkthrough/corporate-finance/3/time-value-money/present-value-discounting.aspx.
In short, if you have $100k today, and invest it in something which gives you 10% each year, then each year you add 10% of the current balance to get the new balance. ie: in year 1 you add 100k * 10% = 10k, giving a new total of 110k; in year 2 you add 110k * 10% = 11k, giving a new total of 121k, etc. - Mathematically, each year's amount is given by the formula listed above for the FV calculation.
Where this gets tricky is that you are giving yourself a negative interest rate - meaning every year, the value is decreasing each year by 10%. You have attempted to use the FV calculation with a negative interest rate, but that's not quite correct. What you should be using is the PV formula.
For the PV formula, if you know that you will receive 100k each year, you need to determine how much cash you would have needed originally, in order to earn the same amount - that is the present value of the cash flow stream. Now, you need to 'gross-up' the value of each year's income stream. The formula for this gross-up is derived mathematically and results in what I have above there for PV. Think about it like this - if there's a shirt that normally costs $100 and is now 30% off, you can see that you simply multiply it by 30%, to get $70. But if you see of shirt on sale for $70, and it's 30% off, then to determine the original base price you need to take $70 & divide by .3 - which gives us $100.
To prove to yourself that the PV formula is appropriate, take the income stream of, say, year 4 [3 periods of interest later, assuming first payment is received in day 0]: 100k / (1 + 10%)^3 = $75,131. Now, work backwards - if you want to know the future value of a $75k investment held for 3 periods of interest compounded annually with a 10% annual rate, you go: 75,131 * (1 + 10%) ^ 3 = 100k.
This is an important financial distinction, and you should read over the sources I've linked to ensure you understand it.
There is a difference in the calculation. FV takes 100,000 and discounts it by 10% to the number X so that X is 90% of the original value (i.e. X=90,000). PV by contrast discounts it to the number X such that 100,000 is 10% more than X. Quick math says X will be 10/11 of 100,000, i.e. 90909.09.
Indeed, if we apply this calculation 5 times:
Year 1 $100,000.00
Year 2 $90,909.09
Year 3 $82,644.63
Year 4 $75,131.48
Year 5 $68,301.35
---------------------
Total $416,986.5
I don't know if there is a way to make them behave the same way (I don't think there is, as they're calculating different things), but since FV solves your problem why not just use that?