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Take Five Systems, a new start-up, is developing a new iPhone application (“app”) and provides you...

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Finance

Take Five Systems, a new start-up, is developing a new iPhoneapplication (“app”) and provides you with the followingassumptions:

  1. Development and testing of the new app will take four months.Month five is the first month of revenue generation.

  2. Initial monthly app sales of 5,000 downloads at a price of$2.99

  3. Unit sales will grow at 15% per month for months six throughtwelve and then will be flat thereafter

  4. The app will become obsolete and will need to berevised/replaced after month 18

  1. Take Five Systems is concerned about the accuracy of theirrevenue estimates in Question 1. Specifically, they wish to usesensitivity analysis to evaluate the impact on Month 18 revenue ofthe following:

    1. Variations in 2% increments between 9-21% in the growth rate ofunit sales in Months 5-12 (that is, 9%, 11%,..., 19%, 21%)

    2. Variationin500unitincrementsbetween2,500and7,500inthelevelofinitialsales (that is, 2,500, 3,000,..., 7,000, 7,500)

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