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Example 1: Number of Units Sold - Payback Target in 18 months from start of operations, June Y2.

The analytical procedure is described in Module 4 Case 2.1.

Why this example?

This example refers to the analytical approach of changing the number of licenses to obtain a payback in June Y2, working with cash flows, financial statements and graphical interpretation.

We shall describe how to find the additional number of units, over the quantities in the baseline cash flow, to be sold, so to reach the payback target at a set future date, middle of the second year in this example. A similar approach shall be followed for other target periods.

The following is the case of the key management action: number of licenses sold. The numerical computation is shown in Module 4 Case 2.1.

For teaching purposes we shall consider that the additional units needed to obtain the target, over the baseline case, will be sold from January to June Y2. In previous examples of liquidity above the different managerial actions, over the baseline case, have been taken during several months, so the procedure to insert values in the cash flows, during several months, such as, capital, loans, supplier’s credit, non-sales, has been shown already.

Management has found, through its market research, that there is a sustained demand for the product and that the additional number of licenses, planned to be sold during the first half of Y2, can be achieved with the available baseline budget for PR & Marketing without any further increase in spending for these activities.

The following calculation procedure 

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