Please find the attached case study and answer the two questions.

1. Suppose you’re given the following Bass diffusion parameters for the growth of Skype: p = 0.012; q = 0.549; N = 600m; Retention rate = 85% (I’ll show in class how these figures were estimated). Given the numbers for revenues and operating costs given in the case, and the number of subscribers as indicated by these estimates of the diffusion equations, can you find the total Customer Equity of Skype? Assume a discount factor (WACC) of 10%. 2. Under the assumption above, what should have been the average Skype Customer Lifetime Value to justify the price that Microsoft paid? Explain.

Please note that our case study is on page number 109 to 125.

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