Determine the average value of a loyal customer

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A computer manufacturer has a 75 percent customer retention rate. Their accounting department estimates the incremental contribution to profit and overhead as 40 percent. Customers purchase computers every three years at an average cost of $1,500.00.

(a) Determine the average value of a loyal customer.

(b) Determine the average value of a loyal customer if the defection rate drops from 25 to 5 percent.

Reference no: EM131034472

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