Fangs and profitability

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Sirion
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Fangs and profitability

Postby Sirion » Fri Nov 09, 2012 11:43 am

With the prices of tiny fangs and small fangs being in such a fluctuating state right now, I know that you guys are worried about your current primary source of income. That said, I felt that you guys needed to see examples of the maths involved with the profitability of fangs, so that you guys can see how this works for us.

NOTE - The profitability that you see here will be slightly higher than you will see in game on average because I am not including the cost of dusts in this equation. It should also be noted that I am using the average of the range of secondary materials (small fangs) that can be created, so you could see less or more depending on luck/RNG


We have been using a ~9.5:1 ratio thus far in our conversions. I will lower this to a 9:1 for ease of calculations.

What this means is that we are spending 5c per tiny fang. Therefore 250 tiny fangs costs us 1250c (12s50c).

We are selling small fangs for 45c each (only in this example; this is to make the 9:1 ratio easier to compute mathematically, I don't feel like dicking with extra decimals).

Okay, the range of small fangs that can be produced is 8-40. The average of that range is 24. We will thus assume that over time our transmutes will average out to 24/use. It may seem lower, but I guarantee those times that you see 28+s simply don't stick in your head as often as the 8s and 9s. Probability and statistics average this to 24/xmute, so that is what I will be assuming.

Okay, this is the math for the tiny fangs conversion:

250(stack) / 50 = 5 stacks available for xmuting

to maintain a 9:1 ratio and for ease of calculation, we will use 1c as the cost of tiny fangs, and 9c as the cost of small fangs.

5 stacks of 50 fangs = 50c per stack

Math for small fangs:

24 is the average number of small fangs produced per xmute over time

therefore we have 24 * 9 = 216 c per xmute

In order to find our profitability, we have to subtract the TP 15% and the cost of the investment per stack:

216 *.15 = 32.4 c (TP %age)

Actual profits on small fangs in this scenario = 216 - 32.4 - 50 = 133.6c Do note that this is per xmute, not total. To find the total profit you will have to multiply this by however many times you xmuted (5 per stack of 250 tiny fangs)

This means we would be making roughly 1.336 silver on every transmute if we were going from 1c to 9c on tiny fangs, which means we would be making ~ 1.336s per skill point and per 5 shimmering dusts

NOTE - we do not buy sell at a rate this low because the cost of the dust would make it worthless, I am just using this as a perspective tool so you can see how the profits work on this. Our investment was 50c our gross profit was 216c profit, our actual profit was 133.6c


Let's now move forward with higher numbers, since the market is inflating

Maintaining the same 9:1 ratio, we will use 1 silver for tiny fangs and 9 silver for small fangs:

Tiny fangs

250 * 100c = 25,000c (250s0c) per stack

25,000 / 5 = 5,000c (50s0c) per xmute stack (per 50 Tiny fangs)


Small fangs

24 * 900c = 21,600c (216s0c)

profits

21,600c = total per xmute

21,600 * .15 = 3,240c (trading post cut)

21,600c - 5,000c - 3,240c = 13,360c net profit per xmute. This means that you make 13,360c per skill point and 5 dusts at this ratio and this price point. Converted back to silver this is ~ 133s60c per skill point and 5 dusts.



What this means for us

What this means for us is that the rising price of tiny and small fangs does not negative inhibit our profitability, and in fact, since the cost of skill points and dusts are not increasing with the same ratio, we stand to make more profit per transmute not less, even if the ratio declines somewhat because of the increased value we garner from the skill points and dusts not increasing in cost. Ideally the system will stay close to 9:1, but as of now it's looking like it's closer to 7.5:1.

This is still highly profitable. In order to determine when it no longer becomes profitable, simply lower the amount of money you sell the small fangs for until profits become less than expenses. When Jim did the maths some months ago it turned out to be somewhere along the 3-4:1 margin.

I never xmute below a 5.5:1 or 6:1 margin, because you do have to remember that 24/stack is based on the law of averages over time and not on every instantaneous transmutation. I seem to get unlucky as often as I get lucky, so I like to play it as safe as possible. We should all have sufficient capital to handle any bad RNG setbacks though, so it really shouldn't matter much, even if we do drop down to a 5:1 profitability table. The only issue at that point is: do you feel like it's worth your time to keep your eyes so focused on the TP rather than on doing other things.
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Twystyd
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Postby Twystyd » Sat Nov 10, 2012 9:58 am

Well done sir.

I'm beginning to agree with your assessment that the price changes have been a reflection of the "bot" ban. Anet claims to have purged over 10k bots and I have noticed a huge increase in the lower end blood ingredients as well.
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