Comment $100 million not enough for most popular textbooks (Score 5, Insightful) 560
Consider the economics of it:
3,860,567 = Number of 20 year olds (2000 census rough estimate based on 1/5th of 20-24 year olds)
27% = Percent of population over 25 with a bachelor's degree (2000 census)
25% = Percent of students taking the most popular/useful classes (estimate)
50% = Percent of these students using the most popular textbook (estimate)
5 = Years a textbook edition remains in print (estimate)
6% = Risk free rate of return (estimate)
$100 = Average textbook price (estimate)
20% = McGraw hill net margin (per www.fool.com)
The textbook company would sell 131,259 textbooks per year, for a net profit of $2,625,186 annually. Given the 5 year life span and 6% risk free rate, the textbook company would be willing to sell a textbook with the above expected sales for no less than $11 million. This means we could purchase roughly 9 of the most popular textbooks for $100 million. May be off by a fair margin, but it's clearly not going to be near 100 textbooks. Seems like there are much better uses of the money.
3,860,567 = Number of 20 year olds (2000 census rough estimate based on 1/5th of 20-24 year olds)
27% = Percent of population over 25 with a bachelor's degree (2000 census)
25% = Percent of students taking the most popular/useful classes (estimate)
50% = Percent of these students using the most popular textbook (estimate)
5 = Years a textbook edition remains in print (estimate)
6% = Risk free rate of return (estimate)
$100 = Average textbook price (estimate)
20% = McGraw hill net margin (per www.fool.com)
The textbook company would sell 131,259 textbooks per year, for a net profit of $2,625,186 annually. Given the 5 year life span and 6% risk free rate, the textbook company would be willing to sell a textbook with the above expected sales for no less than $11 million. This means we could purchase roughly 9 of the most popular textbooks for $100 million. May be off by a fair margin, but it's clearly not going to be near 100 textbooks. Seems like there are much better uses of the money.
