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Accumulation of a financial base in detail

Posted by: Ekkehard Augustin - Thu Jul 21, 2005 11:31 am
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Accumulation of a financial base in detail 
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Post    Posted on: Fri Aug 12, 2005 11:45 am
Hello, Sigurd,

Thank Your Very Much. I will do so as soon as possible.



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Post    Posted on: Sun Aug 14, 2005 1:38 pm
The excel file::

No business should be based on it and no consultant purpose is intended !
http://www.XPrizeNews.org/Downloads/cal ... %20etc.xls

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Post    Posted on: Sun Aug 14, 2005 5:22 pm
After preparing the Excel-spreadsheets I used for sending them to Sigurd I detected some errors - unremarkedly used numbers of flights based on four passengers per vehicle which is wrong. The error is not removed from the downloadable spreadsheets because I didn't detect them previous to sending the e-mail to Sigurd. The correct tables are:

1. Neglecting all fixed costs except the investment into the vehicles and into infrastructure

Table of Break-Even-Points

Code:
tot. flights per flight per flight per seat per seat
veh. only veh. only
557,1 35897,44 -143589,74 5128,21 -20512,82
1057,1 85135,14 - 9459,46 12162,16 - 1351,35
1557,1 102752,29 38532,11 14678,90 5504,59
2057,1 109523,81 61904,76 15646,26 8843,54
2557,1 117318,44 78212,29 16759,78 11173,18
3057,1 121028,04 88317,76 17289,72 12616,82




2. Investment into the vehicles, into infrastructure and license costs

Table of Break-Even-Points

Code:
tot. flights per flight per flight per seat per seat
veh. only veh. only

557.1 23034.19 -156453.00 3290.60 -22350.43
1057.1 78355.86 - 16238.74 11193.69 - 2319.82
1557.1 98149.85 33929.66 14021.41 4847.09
2057.1 108321.76 59710.65 15474.54 8530.09
2557.1 114515.83 75409.68 16359.40 10772.82
3057.1 118683.01 85973.52 16954.52 12281.93




3. Investment into the vehicles, into infrastructure, license costs and employee cost

Table of Break-Even-Points

Code:
tot. flights per flight per flight per seat per seat
veh. only veh. only

557.1 -58773.38 -238260.56 - 8396.20 -34037.22
1057.1 35241.06 - 59353.54 5034.44 - 8479.08
1557.1 68879.25 4659.07 9839.89 665.58
2057.1 86165.54 37554.43 12309.36 5364.92
2557.1 96691.83 57685.69 13813.12 8226.53
3057.1 103774.95 71064.67 14824.99 10152.10




4. Investment into the vehicles, into infrastructure, license costs, employee cost and 10% safety margin

Table of Break-Even-Points

Code:
Tot. flights per flight per flight per seat per seat
veh. only veh. only

557.1 -86189.18 -265676.36 -12312.74 -37953.77
1057.1 20792.19 - 73802.40 2970.31 -10543.20
1557.1 59069.93 - 5150.26 8438.56 - 735.75
2057.1 78740.43 30129.32 11248.63 4304.19
2557.1 90718.56 51612.41 12959.79 7373.20
3057.1 98778.61 66068.33 14111.23 9438.33




5. Profits in the profit zone

Table of profits

Code:
Flights revenues variable costs fixed costs profit
140000/flight 117000/flight

500 70000000 60500000 11603936.67 - 2103936.67
1000 140000000 121000000 11603936.67  7396063.33
1500 210000000 181500000 11603936.67 16896063.33
2000 280000000 242000000 11603936.67 26396063.33
2500 350000000 302500000 11603936.67 35896063.33
3000 420000000 363000000 11603936.67 45396063.33


So the variable costs are between 21,000 and 121,000 dollars and the profits are sevral millions less than i nitially calculated - between 7,000,000
and 45,000,000 per year which menas an accumulation of between 114,792,126.33 and 290,792,126.33 after seven years of operation.





Now a new and better explanation of the calculations - thoughts and approaches behind them and the algebraic modifictions.

The topic of this thread are the details of accumulating a financial base by profits. So the profits Virgin Galactic could have have to be looked for.

Profit P is the difference between revenues R and costs C: P = R - C.

Consequently it's required to know the revenues as well as the costs to find out the profits. What it is known currently? No revenues directly but is
it possible to find out the revenues? Hm - what are the revenues?

Revenues are the price Pr of a product or service multiplied by the number n of the profit or service sold: R = n * Pr.

Are there informations about the prices at Virgin Galactic? Yes - but hey seem to be problematic because there are three different prices - which way
do they have to be handled? Are there different numbers concerning service sold too? The informations are talking about 100 seats, 300 seats and the
rest seperately in the worst case. But the service is flight - not seat. Are there connections or links bewteen the two? There are 7 seats per flight
- so numbers of flights can be calculated out of the numbers of seats and the number of seats per flight.

Obviously there are informations concerning two numbers of service n1 and n2 while a third number n3 remains unknown. Do the informations provide links
or connections between the numbers known and the prices known? Yes - they say that the 100 seats will have a price of 200,000 per ticket and the 300
seats will have a price of 100,000 per ticket while the unknown rest will have a pice of 20,000 per ticket. The unknown rest of seats can be considered
later in short.

The service isn't the single seat and the ticket for it but the number of seats flown by one service. So the number of seats per flight has to be multiplied
by the ticket price to get the price for one service.

What has been said is the following - given 7 seats per flight:

R1 = n1 * 7 * Pr1 and
R2 = n2 * 7 * Pr2

and

n1 = 100/7 and
n2 = 300/7.

Inserting numbers results in:

R1 = 100/7 * 7 * 200,000 = 100 * 200,000 = 20,000,000 and
R2 = 300/7 * 7 * 100,000 = 300 * 100,000 = 30,000,000

and

R1 + R2 = 50,000,000.

It looks a little bit strange that I first divide the numbers of seats by 7 und multiply it by 7 again - the reason is the unknown n3 which is NOT a number
of seats but of a number of services=flights. It is of no help to use a number of seats instead of n3 because of costs - I will explain that later.

So the informations say that the revenues R include a portion fo 50,000,000 but include an unknown portion too which is:

R3 = n3 * 7 * 20,000 = n3 * 140,000.

The revenues then seem to be:

R = R1 + R2 + R3 = 50,000,000 + n3 * 140,000.

Then profit is:

P = R - C = 50,000,000 + n3 * 140,000 - C.

This doesn't tell very much because n3 is unknown - perhaps informations about costs are of some help. What informations about costs are there? The vehicles
cost 100,000,000 altogether, the infrastructure etc. cost another 100,000,000, there are license cost of 21,500,000 in 15 years, 75 pilots will be hired and
additional employees are required the wages of which are known by the labour market.

All these costs are independent of the number n of flights and of the unknown number n3. The number of vehicles is unchanged and unmodified by the number of
flights they do. So the information tell us the costs that are fixed F.

I included all the numbers step by step as

F = 100,000,000,
F = 200,000,000,
F = 100,000,000 + 21,500,000/15 * 5,
F = 200,000,000 + 21,500,000/15 * 5,
F = 100,000,000 + 21,500,000/15 * 5 + employee cost,
F = 200,000,000 + 21,500,000/15 * 5 + employee cost,
F = 100,000,000 + 21,500,000/15 * 5 + employee cost + 0,1 * (21,500,000/15 * 5 + employee cost) and
F = 200,000,000 + 21,500,000/15 * 5 + employee cost + 0,1 * (21,500,000/15 * 5 + employee cost).

The number 5 in the second term is used because this is the number of years after which Virgin Galactic expect to be in the profit zone latest.

But what about the propellant etc.? The amount of propellant Virgin Galactic needs seems to depend on the number of flights since with no flights no propellant
would be required and a vehicle that should fly can't fly with no propellant.

This the reason why I don't calculate a number of seats out of the unknown number n3 - each fligth launches all seats and as long as there are enought customers
on each of the seats will sit a passenger.

These costs are dependent of the number of lights n and the unknown number n3 - obviously they are variable costs V:

V = n * v.

The number of flights n is the sum of the number of flights calculated above and the nknown number n:

n = n1 + n2 + n3 = 100/7 + 300/7 + n3

from which it follows that

V = (100/7 + 300/7 + n3) * v = (400/7 + n3) * v.

So there are two kinds and terms of costs which should be added:

C = F + (400/7 + n3) * v.

Since there no further informations are available the following equation contains all data:

P = R - C = 50,000,000 + n3 * 140,000 - (F + (400/7 + n3) * v).

Let's choose the first alternative value for F I listed above - 100,000,000:

P = R - C = 50,000,000 + n3 * 140,000 - (100,000,000 + (400/7 + n3) * v).

This modifies to

1. P = 50,000,000 + n3 * 140,000 - 100,000,000 - (400/7 + n3) * v
2. P = 50,000,000 - 100,000,000 + n3 * 140,000 - (400/7 + n3) * v
3. P = -50,000,000 + n3 * 140,000 - (400/7 + n3) * v

Still there is a problem - P, n3 and v are unknown. This is of no help - so what to do? Companies
can have losses or they can have profits or they can hvae neither losses nor profits but simply 0.
Losses are profits with negative sign - while 0 menas that the revenues in absolute numbers - no
sign - are as high as the costs.

So let's assume that situation - P = 0:

0 = -50,000,000 + n3 * 140,000 - (400/7 + n3) * v

This modfies to

1. (400/7 + n3) * v = -50,000,000 + n3 * 140,000 - (400/7 + n3) * v
2. v = (-50,000,000 + n3 * 140,000 - (400/7 + n3) * v) / (400/7 + n3)

2. gives the variable costs as a function of the unknown number n3 - and tells for each alternative
value inserted into n3 the variable costs v. At each resulting n3-v-combination the profit is zero (P = 0)

This I have done - and since v as well as n3 are the only numbers not known in the equation for the
profit I inserted them there and got the profits.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)

EDIT: Typing-error corrected regarding the capital accumulated after seven years.


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Post    Posted on: Tue Aug 16, 2005 11:51 am
I have forgotten to explain the connection between averaged variable costs and economies of scale - so I do it now. The variable costs
calculated in previous posts are averaged because there seem to be economies of scale which allow for the price reduction from 200,000
down to 100,000 and then 20,000 dollars. Economies of scale mean that the variable costs themselves are reduced - the costs caused by
the single servce, the single flight. To get an average of 121,000 dollars - the highest value calculated in this thread - infinite
different paths of reduction are thinkable so what I provide here is an example only.

The averaged variable costs of 121,000 have been got if 3057,1 flights were required to break even, id est to get a profit of zero and
to be in the profit zone after that. Since the average of the variable costs is the sum of these costs of each flight divided by the number
of flights the sum of the variable costs of all the flights until achieving the break-even-point is 369,914,285.7 dollars.

Let's assume now that the variable costs of all the first 14,28571429 flights (means 100 seats and contractors!) are 1,300,000 - then the product
of these two numbers is to be subtracted from the 369,914,285.7 dollars giving 351,342,857.1 dollars. Next let's assume that the next 42,85714286
(meaning 300 seats and contractors) flights have variable costs of 350,000 dollars each. Then this would mean that economies of scale have reduced
the costs by 950,000 dollars. The number of flights multiplied by 350,000 dollars are 15,000,000. Subtracted from 351,342,857.1 dollars I get 336342857,1
as the sum of the remainder of 3000 flights. The result of the division by this number is 112114,2857 dollars as the variable costs at the break-even-point.

So averaged variable costs of 121,000 dollars could mean actual variable costs of 1,300,000 dollars, 350,000 dollars and finally 112,114.29 dollars -
the first two high above the averaged variable costs and the last more than 8,000 dollars below the averaged variable costs.

There is an infinite amount of combinations of such numbers - so please don't take them for the real and valid ones. And it may be that there are much
more levels but only three of them are used for price reductions.

Economies of scale included increases of some of the fixed costs - so the fixed costs included in the 10%-safety margin as well as a portion of the employee costs
are averaged too! Currently I have no examples in mind for these - perhaps I think about one one day.


Here some additionaly points:



1. Seats already sold

According to the article "US export rules frustrate Virgin" ( news.bbc.co.uk/1/hi/technology/4506133.stm ) Andy Hill has posted the link to in another section the first 100 already are sold which would mean that they have secured the first revenue of 20,000,000 and
2,000,000 deposits while Sam Dinkin in the article "Virgin Galactic Update" ( www.xprizenews.org/index.php?p=993 ) said that Virgin Galactic are about half way through the first 100 contractors meaning about 10,000,000 of the first revenue and about 1,000,000 deposits. Today
the article "U.S. Okays Virgin Galactic Spaceship Plans" ( www.space.com/news/050815_virgingalactic_itar.html ) says
Quote:
"We have a significant level of deposits now nearly $10 million worth," Whitehorn said. Some people are paying the full price to be founders and some are putting down deposits to fly in the future, he said.




2. Advantage of the deposits

They can be used for getting interests - either in favour of the customer as portion of the 90% of price still to be payed or in favour of financing the five vehicles.



5. deposits and variable costs

In Political Economics there are two minimum required price levels identified - one long run minimum price for covering all costs and one short run minimum price level for covering averaged variable costs only. If the price falls below the short run level a company is forced to leave the market because of infinite losses - if on the other
hand the price falls below the long run level the company can try to get rid of some of the fixed costs and finance the losses. The reason for being forced to leave the market if the price falls below the short-run-level is that the company in that case can't pay propellant for example - and this will mean bankruptcy. Such deliveries are
financed short-run. If fixed costs aren't covered in the short run then this is no problem because they are financed long-run.

Now the averaged variable costs as calculated in previous posts are a little bit below the deposits if divided by the number of seats. This means that Virgin Galactic may have made sure
that their short-run-costs (= variable costs) are covered.

Additionally they said that they will do 50 to 100 test flights before beginning of operations - the variable costs of these flights at least
partially can be financed by the deposits too.



6. It will be interesting to know and to watch the number of contractors and its growth - may be they can make sure that their costs are
covered vefore they have done their first flight. In that case it would be possible theoretically to start funding the CXV before achieving
the profit zone. That funding can be done siccessively - and they get their full revenues successively - when their first flight launches the
first 140,000 dollars of deposits will have been completed to 1,400,000 dollars of revenues and after the first five flights the first 700,000
dollars of deposits will have been completed to 7,000,000 dollars of revenues which is 1,000,000 more than the sum of 6,000,000 t/Space already
have got from NASA.



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Post    Posted on: Tue Aug 23, 2005 12:10 pm
I derived fixed costs for the example of economies of scale now which are linked to the example of economies of scale.

The averaged variable costs of 121,000 dollars are calculated under the assumption that there are the fixed costs of 100 million dollars of the five vehicles only.

Now in the example of possible economies of scale I assumed high variable costs of 1,300,000 dollars per flight for the first 14.28571429 flights. So there would be revenues of 20,000,000 dollars and variable costs of 18,571,429 dollars. Since there are no profits then this would mean 1,428,571 fixed costs at least.

For the next 42.85714286 flights I assumed variable costs of 350,000 dollars per flight. These flights would have revenues of 30,000,000 dollars and variable costs of 15,000,000. Still there are no profits then - which means that there are 15,000,000 dollars fixed costs then at least.

Obviously the fixed costs in the 42,85714286-flights-case are higher than in the 14.28571429-flights-case while the variable costs per flight are less!

This is repeating in the last case where the revenues are 420,000,000 dollars and the variable costs are 112,114.29 dollars per flight. 300 flights are left until break-even which means 336,342,870 dollars variable costs for all 3000 flights together. There still is no profit - consequently this means 83,657,130 dollars are the minimum fixed costs now - again increased while the variable costs are reduced again.

If you want you could use these numbers to create an example of cost functions for a diagram that shows economies of scale - what I proposed in the thread about costs.

It may be interesting that the sum of the fixed costs really is the sum of 100 million dollars for the five vehciles - 4 of them are completely included in the highest fixed costs, 1 partially. This could be interpreted as if one vehicle is sufficient for the first 57.1 flights and the first 14.29 flights are flights after which the vehicle could be given back in case it is bad. For this reason it's not completely equipped regarding luxury and
comfortability. This is changed in the next 42.86 flights. If then no major problems are detected yet the fleet is going to be completed.



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Post    Posted on: Thu Aug 25, 2005 11:34 am
An article to be read under www.xprizenews.org today may be pointing to a possible project profits like those I calculated may be going to be invested in: The article "SpaceShipThree poised to follow if SS2 succeeds" ( www.flightinternational.com/Articles/20 ... ceeds.html ) says.

Quote:
Orbital vehicle SpaceShipThree (SS3) will be developed by space tourism company Virgin Galactic and Mojave-based SpaceShipTwo (SS2)-developer Scaled Composites, if the planned SS2 suborbitalservice is successful, says Virgin Galactic president Will White­horn.


This would mean that it would not be required that Virgin Galactic invests the profits and the depreciations of the current investments into a CXV - they would develop another orbital vehicle which also could compete for the ASP. This would open up the chance to get the 50 million dollars to be won by the ASP - and it would end up in a vehicle which at least partially would compete to the CXV. But this please shouldn't be discussed here.

This thread should be used to look into the details of the accumulation process further.



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Post    Posted on: Sun Sep 04, 2005 11:07 am
It seems to look a little bit strange that t/Space is working on the CXV while Scaled Composites and Virgin Galactic have announced an orbital SS§ in case of success of SS2. SS3 then should have to be different to the CXV – and it would be ist competitor. The talk about SS3 would mean That Virgin Galactic won’t buy a CXV. It might be to small or too large, not optimized for orbital tourism or anythiung else. On the other hand Scaled Composites is part of t/Space and thus would compete to itself.

While thinking about it I recognized that it may open up the way to building areal privately funded orbital vehicle.

It is no way required that Scaled Composites and Virgin Galactic wait until Virgin Galactic have accumulated 114.000.000 to 290.000.000 dollars – they know the number of tickets sold before the first flight and the total required funds don’t need to be expensed all at once. Plus Richard Branson could invest some of his fortune to increase the balance capital of Virgin Galactic.

Scaled Composites gets experiences and insights by working as part of t/Space – they coulkd take inventions and innovations of the others and improve them. This would require the agreement of the others and of t/Space which could be got by paying license charges – either by Scaled omposites or by Virgin Galactic. The charges could be paid out of the initial revenues of Virgin Galactic which are part of the 114.000.000 to 290.000.000 dollars accumulated after 7 years of operation latest.

So the work on SS3 could be done in parallel to the beginning of opertaions of Virgin Galactic late 2008 while t/Space would get funds by the license charges they and the involved companies get from Scaled Composites and Virgin Galactic. If – additionaly – SS3 is smaller etc. than the CXV will be then they could consider SS§ to be aprototype of their CXV plus they could get improved and tested technologies from Scaled Composites. And it may that t/Space get some revenues this way they wouldn’t have got if no SS3 were be developed.

The license charges would mean that SS3 is fully privately funded – and could compete for the ASP which would be achance to add another 50.000.000 dollars to the accumulated capital if they would win the ASP.

Scaled Composites and Virgin Galactic have another advantage too – they have The Spaceship Company which could build SS3 based on economies of scale theat company is getting by produing SS2 in series – the five vehicles for Virgin Galactic are a first serious and they think there will be additional customers in the future too.



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Post    Posted on: Sun Sep 25, 2005 3:29 pm
I have been thinking about the possibility of future price drops today (the reason was the Collins-thread partially).

If Virgin Galactic would decide to invest into a larger suborbital vehicle a significant time before they set out of service all their current vehicles the the follwing situation would occur:

The new vehicle can be expected to have economies of scale - the costs will be less than those of the current vehicle while the total investment per vehicle will be larger on the current technical and technological base.

They will be interested to keep the older vehciles doing passenger flights. The customers will know that the new vehicle will be cheaper and that the price will be dropped. This would mean that Virgin Galactic have to drop the price for flights by the older five vehicles too - down to the level expected for floghts by the new vehicle.

The new vehicle will be a larger investment than the older ones and for this reason they will want more passengers - so they can't but offer the flights by the new vehicle below $20,000 according to the eonomies of scale.

But they wouldn't want the customers to wait for the new vehicle because of their running fixed costs (pilots, runway etc.) and other reasons. So they have to keep the older vehciles to be interesting - that's the reason for the price drop for the ride by them.

Of course this is one scenario only of several possible - but it is plausible concrete explanation why the price may drop significantly in teh future.



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Post    Posted on: Sat Oct 08, 2005 11:31 am
According to the article "X Prize veterans work on next space steps" ( msnbc.msn.com/id/9615023/ ) there may be new informations about Virgin Galctic's vehicles futurely. And it may be that there will be more than seven seats per flight.

In that case I will insert the new number(s) into the calculations already posted. I will make use of each number published - although there may be numbers which have to be posted in another thread of this section.



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Post    Posted on: Sat Oct 15, 2005 12:05 pm
Because of the article "The Mega-Module Path to Nowhere (Or: How to Eliminate Human Space Flight With an HLV)" ( www.space.com/adastra/adastra_mega-modules2_051013.html )
it is essential here to point again to the steps of the calculations I have done.

At first I included the depreciations on the vehicles and the infrasrtucture only. These are capital costs which fall apart once the depreciations are completely covered. These are capital costs while the pilots etc. are labour costs which never will fall apart.

I used a range of flight rates to calculate the tables. At the beginning the actual flight rate may be near to the lower boundary of the range while learning effects - mentioned in the article - may increase the flight rate to the upper boundary. These effects are responsible for a portion of the economies of scale.

The capital costs may deserve a more detailed look perhaps - I am thinking about it.



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Post    Posted on: Sat Oct 22, 2005 6:34 pm
In between an article Sigurd linked to at the news page is reporting a number essential here - "Clear skies for Virgin spaceliner" ( news.bbc.co.uk/2/hi/science/nature/4365612.stm ) says that Virgin Galactic have got $10,000,000 of deposits up to now.

Since it has been reported last year that the deposit for a flight priced at $200,000 has to be 20,000 this menas that Virgin Galactic has 500 contractors currently.

This would mean nothing else than that the best case came true: 100 contractors paying $200,000 plus 400 customers paying $100,000.

So they already know that they have $60,000,000 revenues at least when they have a vehicle ready for flying these customers.

I am wondering if the $20,000-deposits may mean that the deposit has to 10% of the price. May be I remember something like that. In that case they would have 900 contrctors already. Then they have sold 100 tickets at $200,000 plus 400 tickets at $100,000 plus 400 tickets at $20,000 resulting in revenues of $68,000,000.

But I may have misunderstood them and they keep the price at $100,000 until 1,000 contractors have been at the market even if they themselves get a fraction of them which is larger than 50%. Then they would have got revenues of $100,000,000 already.

But it might be totally different also - there may have been contrctors depositing more than $20,000 or 10%. These may have been visionary customers who want to assist personal spaceflight of as many people as possible.

But it seems that up to now the accumulation is working reasonably.

Still the number of flights required is mor than 70% away from the least calculated number flights required to arrive in the profit zone. But the number of potential customers registered still is growing and very high.



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Post    Posted on: Sat Nov 05, 2005 12:01 pm
I going to use the new information now which I considered in the last post.

Up to now Branson's and Virgin Galactic's worst-case-senario has been used to look for their variable costs. Variable costs are independent of the revenues and depend on the number of flights only. So I can use the reuslts of the previous calculations now to look what happens to the break-even-points given the fact that the new information fits into Branson's and Virgin Galactic's best-case-scenario.

So I delay the consideration of their capital costs but the following tables work as a preparation to do that.

Please recall the algebra applied in the earlier calculations:

1. Original equation

I. profit = revenue - costs
II. revenue = R1 + R2 + R3 where R1 is the revenue from the founders, R2 the revenue from the pioneers and R3 the revenue from further customers.
III. costs = fixed costs + number of flights * variable costs
IV. number of flights = n1 + n2 + n3 where n1 is the number of flights of the founders, n2 the number of flights of the pioneers and n3 the number of flights of the further customers
V. R1 = n1 * p1, R2 = n2 * p2, R3 = n3 * p3
VI. profit = n1 * p1 + n2 * p2 + n3 * p3 - fixed costs - (n1 + n2 + n3) * variable costs
VII. break-even-point: profit = 0
0 = n1 * p1 + n2 * p2 + n3 * p3 - fixed costs - (n1 + n2 + n3) * variable costs



2. first modification

n1, p1, n2, p2 and p3 are known - and variable costs are known also from the earlier calculations

fixed costs + (n1 + n2) * variable costs - n1 * p1 - n2 * p2 = n3 * p3 - n3 * variable costs



3. second modification

fixed costs + (n1 + n2) * variable costs - n1 * p1 - n2 * p2 = n3 * (p3 - variable costs)



4. third modification

(fixed costs + (n1 + n2) * variable costs - n1 * p1 - n2 * p2)/(p3 - variable costs) = n3



5. insertion of known variables

(fixed costs + (100/7 + 400/7) * variable costs - 100/7 * 1400000 - 400/7 * 700000)/(140000 - variable costs) = n3
(fixed costs + 500/7 * variable costs - 100/7 * 1400000 - 400/7 * 700000)/(140000 - variable costs) = n3
(fixed costs + 500/7 * variable costs - 20000000 + 40000000)/(140000 - variable costs) = n3
(fixed costs + 500/7 * variable costs - 60000000)/(140000 - variable costs) = n3

The fixed cvsts and the variable costs are inserted according to the table.

First I consider the cases without licence costs, labour costs and 10%-safety-margin only:



Code:
kind    fix costs   fix cost   varable     rev.pio+   flts.pio+   req. add.   break-even
        deprec.     perm.      costs       fndrs.     fndrs.      flights     -flights
veh.    100000000              121028,04   60000000   71,43       2564,04     2635,47
only
veh.+   200000000               38532,19   60000000   71,43       1406,87     1478,30
infra
str.

(cont)
flts per   flts/yr   remark      yrs to
5 yrs.     result.   var.        break-
prev.                costs       even
tbls
3057,14    611,43    maximum     4,19
1557,14    311,43    least > 0   4,52




As turned out the time when the break-even-point is achieved is effected now - complicating further calculations. The licence costs are given on a yearly base - they can be considered to be paid per year. But wages etc. are poid per month - and so unpreventably the labour costs already are to be considered.

So a modification of the equation used up to now is required. I am doing that modification now but will handle the licence costs and the labour costs equally. This can be done here because the operations won't cease when the break-even-point is achieved. The modification consists in sperating the fixed costs
into two components - depreciation and permanent fixed costs like designed in the table already:

I. fixed costs = depreciation + time-dependent fixed costs
II. time-dependent fixed costs = permanent fixed costs * number of periods
III. number of periods = number of flights/number of flights per period = (n1 + n2 + n3)/number of flights per period
IV. time-dependent fixed costs = permanent fixed costs * (n1 + n2 + n3)/number of flights per period
V. fixed costs = depreciation + permanent fixed costs * (n1 + n2 + n3)/number of flights per period



5.a) insertion of the result above into the third modification

(depreciation + permanent fixed costs * (n1 + n2 + n3)/number of flights per period + (n1 + n2) * variable costs - n1 * p1 - n2 * p2)/(p3 - variable costs) = n3



6. a) fourth modification

(depreciation + (permanent fixed costs * (n1 + n2) + permanent fixed costs * n3)/number of flights per period + (n1 + n2) * variable costs - n1 * p1 - n2 * p2)/(p3 - variable costs) = n3



7. a) fifth modification

(depreciation + permanent fixed costs * (n1 + n2)/number of flights per period + permanent fixed costs * n3)/number of flights per period + (n1 + n2) * variable costs - n1 * p1 - n2 * p2)/(p3 - variable costs) = n3



8. a) sixth modification

(depreciation + permanent fixed costs * (n1 + n2)/number of flights per period + (n1 + n2) * variable costs - n1 * p1 - n2 * p2)/(p3 - variable costs) + ((permanent fixed costs * n3)/number of flights per period)/(p3 - variable costs) = n3



9. a) seventh modification

(depreciation + permanent fixed costs * (n1 + n2)/number of flights per period + (n1 + n2) * variable costs - n1 * p1 - n2 * p2)/(p3 - variable costs) = n3 - ((permanent fixed costs * n3)/number of flights per period)/(p3 - variable costs)



10. a) eighth modification

(depreciation + permanent fixed costs * (n1 + n2)/number of flights per period + (n1 + n2) * variable costs - n1 * p1 - n2 * p2)/(p3 - variable costs) = n3 - (permanent fixed costs * n3)/(number of flights per period * (p3 - variable costs))



11. a) ninth modification

(depreciation + permanent fixed costs * (n1 + n2)/number of flights per period + (n1 + n2) * variable costs - n1 * p1 - n2 * p2)/(p3 - variable costs) = n3 * (1 - permanent fixed costs/(number of flights per period * (p3 - variable costs))



12. a) tenth modification

(depreciation + permanent fixed costs * (n1 + n2)/number of flights per period + (n1 + n2) * variable costs - n1 * p1 - n2 * p2)/((p3 - variable costs) * (1 - permanent fixed costs/(number of flights per period * (p3 - variable costs))) = n3



13. a) eleventh modification

(depreciation + permanent fixed costs * (n1 + n2)/number of flights per period + (n1 + n2) * variable costs - n1 * p1 - n2 * p2)/((p3 - variable costs) - permanent fixed costs/number of flights per period) = n3



14. a) insertion of known variables

(depreciation + permanent fixed costs * (500/7)/number of flights per period + (500/7) * variable costs - 60000000)/((140000 - variable costs) - permanent fixed costs/number of flights per period) = n3



Since al further variables are provided by the table here now the complete table:

Code:
kind    fix costs   fix cost      varable     rev.pio+   flts.pio+   req. add.   break-even
        deprec.     perm.         costs       fndrs.     fndrs.      flights     -flights
veh.    100000000                 121028,04   60000000   71,43       2564,04     2635,47
only
veh.+   200000000                  38532,19   60000000   71,43       1406,87     1478,30
infra
str.
veh.+   100000000    1433333,33   114515,83   60000000   71,43       2133,00     2204,43
licnc
veh.+   200000000    1433333,33    33929,66   60000000   71,43       1406,87     1478,30
infr+
licnc
veh.,   100000000   10549033,33    68879,25   60000000   71,43       1270,94     1342,36
empl,
licnc
veh.,   200000000   10549033,33     4659,07   60000000   71,43       1406,87     1478,30
infr,
empl,
licnc
veh.,   100000000   11603936,67    20792,19   60000000   71,43        705,88      777,31
empl,
10%
licnc
veh.,   200000000   11603936,67    30129,32   60000000   71,43       1765,31     1836,73
infr,
empl,
10%,
licnc

(cont)
flts per   flts/yr   remark      yrs to
5 yrs.     result.   var.        break-
prev.                costs       even
tbls
3057,14    611,43    maximum     4,19
1557,14    311,43    least > 0   4,52
2557,14    511,43                4,31
1557,14    311,43    least > 0   4,75
1557,14    311,43                4,32
1557,14    311,43    least > 0   4,75
1057,14    211,43                3,68
2057,14    411,43    least > 0   4,46




What can be seen by this table?

1. The additional 100 pioneers are reducing the time to the break-even-point by between a quater and a complete year.
2. No capital costs are included into the claculations yet which can be seen by the fact that there are no numbers in the first two rows for permanent fixedc costs.

What are the explanations?

1. 100 pioneers more paying $100,000 each mean that for achieving the break-even-point several hundred passengers paying $20,000 onöy aren't required. Additionally
this mmeaqns that the required number of flights is reduced which means that the amount of costs required to break-even is reduced.
2. I understand Virgin Galactic's informations that way that they are using their or Bransons personal capital or fortune. So they don't have to pay capital costs
to a creditor.

What are the consequences?

1. The capital going to be accumulated will be larger than previously calculated.
2. Virtual capital costs don't have effects on the capital accumulated - they only have an impact on the rentability calculated several posts earlier.



I could have looked for the variable costs I would get in the initial calculations much earlier in this thread - they would be larger. But since I already
calculated the worst-case-scenario this seems to make no sense. I am thinking doing it later already - just to see the results - including further considerations.

...



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)


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Post    Posted on: Thu Nov 10, 2005 1:09 pm
Since it may be a little bit confusing what I can conclude from the numbers available by doing a break-even-point-analysis here a small table to clarify the differences between the steps:

Code:
                    1. analysis   2. analysis
prices                X                 X
number of customers   X                 X
investment            X                 X
licence costs         X                 X
number of employees   X                 X
wages                 X                 X
time to break-even    X                 -
turn-around-time      X                 X
variable costs        -                 X


In the first analysis I didn't know the varibale costs and I had to assume numbers of flights to occur within the time to break-even which was given by Virgin Galactic as four to five years. I used "five years".

based on this I could find the variable costs in this 1. analysis.

Then a new information about the number of customers has been given recently. This new number ahs an impact on the time to break-even - so in the 2. analysis required I knew the variable costs now but the time to break-even no longer. This means the availability of one information was lost while the availability of another information had been established earlier. As a consequence I still had enough informations to find out the missing one - simply the missing one was anothor than in the 1. analysis.



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Post    Posted on: Sat Nov 12, 2005 10:08 am
The sum of deposits payed to Virgin Galactic seems to mean that they have 500 contractors up to now - 100 founders and 400 pioneers according to their terminology and the infromation Sam Dinkin got much earlier this year.

To get 400 pioneers is the best case they projected according to Dinkin - but according to him they also said that they cosider the first 1000 customers after the 100 founders to be pioneers and that the price of $100,000 will be valid for all these 100 pioneers.

So they projected to miss the larger portion of the pinoneers as their own customers.

It's lokking a little bit as if they might get much more pioneers than 400 only - but they are right that competiton is keepig some pioneers from them: Space Adventures recently has published that a chinese business man will fly suborbital at either Cossmopolis XX1 (Suborbital Corporation, Moscow" or by the suborbital XCOR-vehicle. And there already is a contrctor at Rocketplane if I remember correct.



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Post    Posted on: Fri Nov 18, 2005 10:22 am
I will detail all the calculations by

.

This will include the use of all the numbers already involved plus looking what variable costs I will get if I assume that the best case would be required to get into the profit zone after five years - this I will do for illustration only since it doesn't make sense besides that.

The article includes the following quote:

Quote:
Branson, 54, is pouring $135 million (£74 million) into his latest commercial experiment, which promises to send the paying public 70 miles above the planet to experience six minutes of weightlessness and see the curvature of the Earth.


I consider the 135 million to include 100 million for the five vehicles and 35 million for infrastructure. It is a value between the two boundaries of the calculations already done - 100 million vehicles only and 200 million vehicles plus infratsructure. I wasn't sure in the first calculations if Branson or Musk had been speaking about the additional 100 million.



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