The Bahamas Consulting Group

Pearson project - Analysis on e-course with

famous partners
Thursday December 6th, 2012

Pearson
Pearson in education
Pearson is the world's leading education company with curriculum materials,
multimedia learning tools and testing programs
Financial Times Group
The Financial Times Group, one of the world's leading business information
companies
Penguin Group
Publishing from novels and classics to cookbooks
The world's leading learning company. We have 36000 people in more than 70 countries, helping
people of all ages to make progress in their lives
2012 MSP S-AB G-02

Team presentation & purpose of the meeting

Team

Purpose
of todays
meeting

Present a tool to analyze the viability of the ecommerce with famous partners project for
education and recommend future actions based
on risk analysis

Erica Jalli
Andy Widmann
Udo Kaja
Pablo Diaz Dominguez

2012 MSP S-AB G-02

The project
In 2011 Pearson decided to analysis the viability of launching a e-learning course
partnering with famous people
Andy did a analysis of the potential revenues for 5 of the 10 potential e-courses
John Kao

Vogue Teen

Quincy Jones

NFL (how to run faster)

Kevin Spacey - ppt

Course 10

Estimated traffic

n1

n2

n3

n4

n5

n10

Correlation factor (2 to 5%)

CR1

CR2

CR3

CR4

CR5

CR10

Demand

n1*CR1

n2*CR2

n3*CR3

n4*CR4

n5*CR5

n10*CR10

10

Revenue

$10
=1

Does it have a positive NPV?

When should Pearson stop the project?

2012 MSP S-AB G-02

Tool and results for the first year

Data
Startup Costs (Platform Build)
Price Per Course
Fixed Cost
Variable Cost
Production Cost Per Course
Total Production Cost
Discount Rate
Tax Rate

Uncertain Input Variables

600,000
10
1000000
0.1
90000
11.5%
22.5%

Number of
courses/yr
Avg Demand per course
Total Demand
Conversion rate min
Conversion rate most likely
Coversion rate max
Paying Customers

Cash Flows
Total Expected Demand

Demand (Paying Customers)

Revenue

10
635000
6350000
0.02
0.05
0.08
317500

4
6,749,953

440,628 $

390,840 $

361,626

3,893,838 $ 4,406,278 $

3,908,399 $

3,616,259

Fixed Cost
Variable Cost

$
$

1,000,000 $ 1,000,000 $
38,938 $
44,063 $

1,000,000 $
39,084 $

1,000,000
36,163

Profit/Cash Flow

2,854,899 $ 3,362,216 $

2,869,315 $

2,580,096

9,004,106

Investment
Net DCF (NPV)

12%
$
(600,000.00)

389,384 $

Growth Rate
% growth rate
average
volatility
Variable Cost
Variable Cost %
min
ml
max

6350000 6581662 6719615 6824916

8255000 8556160 8735500 8872391
3175000 3290831 3359808 3412458

Paying Customer Distribution (Conv Rate)

Min
125605 130187 132916
Most Likely
314013 325469 332290
Max
502420 520750 531665

3
6,645,809 $

DCF

1
2
6,280,254 $ 6,509,371 $

Expected Demand
Estimate
Max
Min

1.5%
1.0%
1.5%
2.0%

134999
337498
539996

3.6%
0.02
0.02

2.1%
0.03
0.03

1.6%
0.04
0.04

1.7%
1.0%
1.5%
2.0%

1.8%
1.0%
1.5%
2.0%

1.6%
1.0%
1.5%
2.0%

9,604,106.3

2012 MSP S-AB G-02

Tool and results for the first year

Data
Startup Costs (Platform Build)
Price Per Course
Fixed Cost
Variable Cost
Production Cost Per Course
Total Production Cost
Discount Rate
Tax Rate

Uncertain Input Variables

600,000
10
1000000
0.1
90000
11.5%
22.5%

Number of
courses/yr
Avg Demand per course
Total Demand
Conversion rate min
Conversion rate most likely
Coversion rate max
Paying Customers

Cash Flows
Total Expected Demand

Demand (Paying Customers)

Revenue

10
635000
6350000
0.02
0.05
0.08
317500

4
6,749,953

440,628 $

390,840 $

361,626

3,893,838 $ 4,406,278 $

3,908,399 $

3,616,259

Fixed Cost
Variable Cost

$
$

1,000,000 $ 1,000,000 $
38,938 $
44,063 $

1,000,000 $
39,084 $

1,000,000
36,163

Profit/Cash Flow

2,854,899 $ 3,362,216 $

2,869,315 $

2,580,096

9,004,106

Investment
Net DCF (NPV)

12%
$
(600,000.00)

389,384 $

Growth Rate
% growth rate
average
volatility
Variable Cost
Variable Cost %
min
ml
max

6350000 6581662 6719615 6824916

8255000 8556160 8735500 8872391
3175000 3290831 3359808 3412458

Paying Customer Distribution (Conv Rate)

Min
125605 130187 132916
Most Likely
314013 325469 332290
Max
502420 520750 531665

3
6,645,809 $

DCF

1
2
6,280,254 $ 6,509,371 $

Expected Demand
Estimate
Max
Min

1.5%
1.0%
1.5%
2.0%

134999
337498
539996

3.6%
0.02
0.02

2.1%
0.03
0.03

1.6%
0.04
0.04

1.7%
1.0%
1.5%
2.0%

1.8%
1.0%
1.5%
2.0%

1.6%
1.0%
1.5%
2.0%

9,604,106.3

2012 MSP S-AB G-02

Demand sensitivity analysis: breakeven first year

2012 MSP S-AB G-02

Initial Investment sensitivity analysis

2012 MSP S-AB G-02

Price per course sensitivity analysis

2012 MSP S-AB G-02

Price per course sensitivity analysis

2012 MSP S-AB G-02

Recommendations

2012 MSP S-AB G-02

10

Q&A

2012 MSP S-AB G-02

11