# Conroy's Acura

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Date Submitted: 10/01/2012 08:45 AM

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1)     Suppose Conroy’s Acura embarks on an advertising campaign to increase the sales of the CSX, a car with a \$2,360 markup. De Lima calculates that is the firm spends \$20,000, the sales of the car to new customers will increase by 10. What is the ROM of the move in net present value (NPV) terms?

The ROM would be 37.67%

2)     If Conroy’s Acura reduces the average markup of the RSX to 7 percent, how many more cars would it have to sell to make such a move profitable?

They would have to sell 9 additional cars. By selling 8 more cars at a 7% markup, the gross profit for the RSX class would be \$165,052. This compares to the base case profit of \$164,031.

3)     The firm is considering three different programs to increase customer retention:

a.      One free oil change per year (increases the annual cost of maintaining the customer relationship \$10 to \$30 – in the spreadsheet, this cost is listed as “Yr. Main Cst”)

b.     Four free oil changes per year (increases annual cost from \$10 to \$80)

c.      Four premium oil changes per year (increases thee annual cost from \$10 to 130)

4)     Assuming the form gains no new sales from these measures, what retention rate would need to be achieved to make each of these programs (a., b. and c.) profitable?

a. 30.0%

b. 37.5%

c. 47.5%

5)     Using the data in question number 3 above, for scenarios a, b, and c, assume one new sale per car class, two new sales per car class and three new car sales per car class respectively. What retention rate would need to be achieved to make the programs profitable?

a. 30.0%

b. 37.5%

c. 45.0%

6)     Manolo Correas is an “avid” brand loyal Conroy Acura consumer. He loves the product and loves to talk about his car with his friends and family. He drives over 50,000 kilometers a year and lives relatively close to Conroy’s Acura and has his car serviced there regularly. He purchased an Acura CSX back in 2001 when he moved into the...