a). The below calculation indicated on the both parameter ofshort run and life time profit ,option 3 is one of the mostsuitable for advertisement of the company, calculated below.

Costs	Opt. 1 Mon. Online Magazine	Opt.2 Affiliated Retail Store	Opt. 3 Search Engine
Variable	$0	$0.25/click	$0.005/click
Total variable cost		1445	420
Fixed	$500	$50	Auction
Total Cost	$500	$1,495	$420
Outcomes
Expected Clicks	1,550	5,780	84000
Average Pg. views	20	5	1.5
% of Clicks Converted	7%	3%	0.14%
Profit
Short term($3.5/client)	$379.75	$606.90	$411.60
Long Term ($25/client)	$2,712.50	$4,335.00	$2,940.00
Profit / Total cost
Short term	0.7595	0.405953177	0.98
Long term	5.425	2.899665552	7

b). To determine the benefits of an advertising campaign, shouldHula Island use the profit on the first sale or the expectedlifetime profits? Why?

c). To choose between advertising campaigns, should Hula Islanduse the total expected profits or the ratio of total expectedprofits to advertising costs? Why?

2. Using your answer from Question 1 (eithershort-run or lifetime, total expected profits, or the ratio oftotal expected profits to advertising costs), determine the winnerof the comparison between Options 1 and 2. Advertising Option 3 isdifferent from the other two options in that the auction determinesthe fixed advertising cost. Assume Hula wins the search engineauction with a bid of $105. Which advertising option (1, 2, or 3)would you recommend to management?