Hi there,
I'm confused on why you multiplied the total income from a SIM card of a contract by the probability (€200 * 25% = €50)
What does the €50 mean here? Does it mean that out of N number of customers, the company earns on average €50 per customer?
However, if use 200 as the revenue base to calculate profitability, then the revenue recognition is happened at the very once the contact has been signed. Is any problem to recognize revenue/profitability like this? Many thanks.
Appropriated and agreed with your calculation logic; the concern on my side is not we use 50 Eur as weighted profitability per customer, but we recognize profit margin once the contact being signed. For instance, if the customer sighed at second year, normally 25 EUR will be recognized as the profit margin gain at the end of the second year. The rest of the 25 EUR will be recognized at the end of third year, where beyond 2 year investment horizon. In this case, within the interview setting, should we add up one more assumption that we assume that all profit margin can be recognized once the contact signed between both party. Thanks again for your elaboration and hope to further look at the problem with you.