Combined Example 8: Reach 40% Return on Equity (ROE) Target after 2 years from start of operations, December Y2 by: (i) Increase in Number of Licenses sold; (ii) Increase in Unit Prices and (iii) Decrease in the Purchase Cost of Licenses.
Why this example?
This example refers to the analytical approach to perform several management actions at once such as: (i) Increase in number of licenses to be sold; (ii) Increase in Unit Prices and (iii) Decrease in the Purchase Cost of Licenses.
Management has decided to implement these actions after carrying out further marketing research that shows a single measure to achieve a target ROE at a set date, for instance, to sell more licenses, as in an earlier example,would not yield expected results as the number of licenses would be too high for the size of the market. Likewise the increase in unit prices by a high amount, as in the example above, would discourage buyers to purchase the
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