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You are First electronic bank (FEB) and you provides a store credit card...

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Accounting

You are First electronic bank (FEB) and you provides a
store credit card to Frys electronics.
After 3 years, 25% of Frys customers (1.25 million)
have a Frys credit card but growth has slowed, and
youre considering a marketing budget of $15M to
gain more Frys customer
Marketing departments data shows you can gain
a customer per $12 spent in marketing
Each customer makes about 10 transactions per
year
Currently, the cost of transaction (for Frys at
25%) per customer is $0.3
Approximation of net profit margin per
transaction (at 25%)=0.5
Your experience curve with Frys is an 80% curve
Is $15M worth the investment? Its a ONE-TIME
expense
Hint:
1. calculate cost saving per transaction with
experience curve
2. Compare the total profit before and after gaining
more customers (Note that profit margin
changes after gaining more customers because

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