Present value and customer life time value

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Reference no: EM13826211

Problem:

What is the customer lifetime value of customer Peter Piper for the first three years of the customer relationship?

Initial acquisition cost

$700

n = number of years retained

3

r = retention rate for each of the n years retained

0.8

Cost of capital

0.1

M1 Margin from customer in year 1

$500

M2 Margin from customer in year 2

$600

M3 Margin from customer in year 3

$650

c1 cost

$120

c2 cost

$100

c3 cost

$100

Additional Information:

This question is basically belongs to the Finance as well as it discusses about computation of present value and customer life time value.

Reference no: EM13826211

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