First National Bank Golden Opportunity Case Solution & Answer

First National Bank Golden Opportunity Case Solution

By looking at the target customers in South Africa, the majority of the population comprises of low level income households and also their literacy rate is very low. Prize-linked products are generally attractive for the low-income households. The major concern of such population is the increased utility in the lowest cost. The product can provide the exactly same features, which the customers are expecting therefore, this can prove to be attractive for the customers.

4. For the written submission, estimate the number of potential customers such that the account is profitable for the bank (to the extent the case gives you sufficient information). How does this number impact the program’s attractiveness to potential customers? Submit a short (one-page, including calculations) summary of your answer.

	Year 1	Year 2	Year 3	Year 4	Year 5
New accounts	108000	240000	300000	300000	30000
amount deposited	1500	1500	1500	1500	1500
total	162000000	360000000	450000000	450000000	45000000
NPV	   1,076,749,761.11
LOSS ON ACCOUNT CLOSING	50000000
	   1,026,749,761.11
Potential Customers	               684,499.84

With the help of the estimation, the complete calculation is done, as it can be seen that it is estimated that the new product can help generate 2500-10,000 new accounts each month for the first six months therefore, the estimated potential customer taken for the first six months is 8000 whereas, the case provides the estimate for the remaining portions of its projections as:

First half of the first year	2500-10000 each month
Second half of the first year	5000-15000 per month
Second year	10000-25000 per month
Next three years	25000 per month
Fifth year	2500 per month

In order to come up with my estimation, I have taken 10,000 for the remaining six months of the first year whereas for the second year, third year and the fifth year 20000, 25000 and 2500 are taken respectively, then with the help of discount rate which is given as 11.50% for the pre-tax cash flows, the NPV is taken from that and the loss is subtracted of 50 million to come up with the potential customers for the company.

It can be seen that the number of potential customers for the products is so large that it can create a potentially attractive figure for the program to initiate. In an event of any kind of loss relating to any economic or legal factor, this amount can have a negligent impact on the viability of the product and thus, it can prove to be successful…………………

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