Problem
Scenario
You are building a launch model for a new managed-investing subscription that will be distributed through Merrill Guided Investing. Your CFO wants a 3-year view that ties operating assumptions to revenue, contribution margin, and cash impact under U.S. GAAP before approving the launch budget. The product will charge a monthly subscription fee, incur variable servicing and support costs per active account, and require upfront build and launch spend. You need to decide whether the launch clears the company’s return threshold and what operating levers matter most.
Financials
| Metric | Value |
|---|---|
| Year 1 average active accounts | 18,000 |
| Year 2 average active accounts | 42,000 |
| Year 3 average active accounts | 65,000 |
| Monthly fee per active account | $14 |
| Variable servicing cost per active account per month | $4.20 |
| Annual fixed operating cost | $2,400,000 |
| Upfront product build and launch cost at time 0 | $8,500,000 |
| Annual maintenance capex | $600,000 |
| Discount rate | 10% |
Question
How would you structure the model and determine whether this product launch should be approved? Walk through the revenue build, contribution economics, free cash flow, and valuation, and explain which assumptions you would pressure-test before recommending a go or no-go decision.
Practicing as: Financial Analyst interview at MerrillHi, I'll play your Merrill interviewer for the Financial Analyst role. Candidates describe these interviews as mostly positive and moderately difficult, so expect me to be friendly and conversational. Take your time with the question above and answer like we're in the room.
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