Title Delivering the lowest B2C monthly price and highest value proposition to Merchant. Introduction

The residual value of products

The next thing we want to know is the residual value amount of the products.

The residual value of the product is the product’s residual after the renewal period.

Firstly we’ll calculate it for the Macbook.

For that, we need to know the following parameters:

1. 
   Default subscription period is 48.
   
2. 
   Renewal period is 36.
   
3. 
   Subscription service rate with VAT is 17.28%
   
4. 
   Macbooks retail price with VAT is 1500.
   

Macbook residual value is calculated by using the following formula:


Residual value = Rounddown ((retail price/(1- subscription service rate with VAT)) / default subscription period) x (subscription period - renewal period).

Although it seems complicated than when we deconstruct the formula then:

• 
  In the first part, we will calculate what would be the default monthly payment for such a macbook; and
  

• 
  then we multiply it by the remaining months after the renewal period.
  
• 
  Finally, we just round the sum down to remove extra decimal places.
  

So let's try:

Rounddown ((1500 / (100%-17.28%)) /48) x (48 - 36) = Rounddown ((100 / (0.827)) / 48) x 12 ) = Rounddown (37.79 x 12 ) = 453 0.844. >> RV 444 -->

So the residual value of the MacBook is 453 euros.

Now let's have a warranty. Warranty as a product can not be renewed. Therefore it does not have residual value. Thus its value after the renewal period arrives is 0.

Estimated subscription amounts and monthly payments of the products

The next calculation step is calculating the estimated subscription amounts and monthly payments for the products.
These two variables are so-called background calculations and are needed to do the next calculations in the sequence.
For calculating the estimated subscription amount, the following formula is used:


Retail price / (1- Subscription Service rate with VAT).
So when using the input information we found before we know that the estimated subscription amount for:

• 
  MacBook is 1500 / (1 - 17,28% ) = 1 813,35
  
• 
  Warranty is 300 / (1 - 17,28%) = 362,67
  

Considering the previous calculations, the total subscription amounts for the Macbook and warranty is 1 813,35 + 362,67 = 2176,02 euros.

When this is done, we can calculate the estimated monthly payment for both products. For that, the following formula is used:

(Estimated loan amount - residual value) / renewal period. And then, this is rounded to 2 decimal places.

When we are using this formula then, estimated monthly payment for:

• 
  MacBook is (1 813,35 - 453 ) / 36 = 37,79
  
• 
  Warranty is (362,67 - 0) / 36 ) = 10,07
  

In conclusion, the sum of estimated monthly payments is 37,79 + 10,07 = 47.36 euros.