Evaluate a credit-card acquisition partnership

You are assessing a co-branded partner capable of bringing in 50,000 new credit-card customers.

Assumptions (applying to Year 1 unless otherwise noted):

• Activation rate: 80% (economics are generated only by activated users).
• Monthly spend per activated user: $600 across 12 months.
• Interchange revenue: 1.5% of spend.
• Rewards cost: 1.2% of spend.
• Annual fee: $95, collected in month 1 from 25% of activated users.
• Servicing cost: $1.00 per user each month.
• Expected credit loss (bad debt): $24 per activated user across 12 months.
• Partner economics: $70 CPA paid to the partner plus a $100 signup bonus for each activated user.
• Discount rate: 10% annually (assume monthly discounting at $10\%/12$).

Tasks:

1. Determine the 12-month NPV per acquired user and the total NPV for the cohort. Present every component: interchange, rewards, fees, servicing, credit loss, and acquisition costs.

2. Work out the break-even CPA (with all other assumptions held constant).

3. Sensitivity: Recalculate NPV for (a) interchange $\pm 0.3$ pp, and (b) credit loss $\pm \$10$. Determine which variable the decision is most sensitive to and give your recommendation.

Overview: This question assesses cohort-level unit economics, discounted cash-flow (NPV) modeling, and sensitivity/break-even analysis in the context of customer acquisition and credit-card portfolio economics.