1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
NeX [460]
3 years ago
9

Assume that a customer shops are a local grocery store spending an average of $400 a week, resulting in the retailer earning a $

30 profit each week from this customer. Assuming the shopper visits the store all 52 weeks of the year, calculate the customer lifetime value if this shopper remains loyal over a 10-year life- span. Also assume a 7 percent annual interest rate and no initial cost to acquire the customer. The customer yields $ per year in profits for this retailer.
Business
1 answer:
balandron [24]3 years ago
4 0

Answer:

a. The customer lifetime value=$10,956.77

b. The customer yields $1,560 per year in profits for this retailer

Explanation:

a.

In order to calculate the customers life-time value, the net present flow is determined from all the future profit cash flows profits. This can be expressed as;

NPV=  R/(1+r)^t

where;

NPV=net present value

R=net cash flow during a certain period

r=annual interest rate

t=period

In our case;

NPV=unknown

R=profits per year=profit per week×number of weeks=$30×52=$1,560

r=7%=7/100=0.07

t=varies from 0 to 10 years

Consider the table below;

Year                   Future cash flows                    Net present value

  1                            1560                                     1560/{(1+0.07)^1}=1,457.94

​   2                            1560                                     1560/{(1+0.07)^2}=1,362.56

  3                            1560                                     1560/{(1+0.07)^3}=1,273.42

  4                            1560                                     1560/{(1+0.07)^4}=1,190.12

  5                            1560                                     1560/{(1+0.07)^5}=1,112.26

  6                           1560                                     1560/{(1+0.07)^6}=1,039.49

  7                            1560                                     1560/{(1+0.07)^7}=971.49

  8                            1560                                     1560/{(1+0.07)^8}=907.93

  9                           1560                                     1560/{(1+0.07)^9}=848.54

  10                          1560                                     1560/{(1+0.07)^10}=793.02

Total NPV= 1,457.94+1,362.56+1,273.42+1,190.12+1,112.26+1,039.49+971.49+907.93+

848.54+793.02=$10,956.77

The customer lifetime value=$10,956.77

b.

The Profit yields per year can be determined using the expression below;

P=p×n

where;

P=annual profits

p=profits per week

n=number of weeks in a year

In our case;

P=unknown

p=$30

n=52 weeks

replacing;

P=30×52=$1,560 per year

The customer yields $1,560 per year in profits for this retailer

You might be interested in
The stockholders’ equity accounts of Martinez Company have the following balances on December 31, 2017. Common stock, $10 par, 3
lord [1]

Answer:

retained earnings     577,200 debit

   stock dividends payable            577,200 credit

--to record declared stock dividends--

stock dividends payable   577,200 debit

               common stock                156,000 credit

               additional paid-in            421,600 credit

--issued stock dividends--

retained earnings    11,544,000 debit

   stock dividends payable     11,544,000 credit

--to record declared stock dividends--

stock dividends payable   11,544,000 debit

              common stock                      3,120,000 credit

              additional paid-in                 8,424,000 credit

--issued stock dividends--

A 2-for-1 stock split NO ENTRY

Explanation:

<u>Stock dividends of 5%</u>

Shares outstanding 312,000 x 5% x $37 market price

15,600 new shares x $ 37 per share = $ 577,200

First we declare the dividend payable, then we write-off the payable and increase equity.

Common stock for the face value and additional paid-in for the difference:

15,600 x 10 = 156,000

577,200 - 156,000 = 421,600

<u>Stock Dividends of 100%</u>

312,000 x 100% x 37 = 11,544,000

same entries as before but, with difference number

face value 312,000 x 10 = 3,120,000

additional paid-in 8,424,000

<u>A 2-for-1 stock split</u>

No entry is required as the company will have double shares but with halft the value each. It will not effect the total market capitalization.

6 0
3 years ago
¿Cuáles son y cómo se elabora un Inventario de Mercancías NIC 2?<br> Ayuda plisssss
Leokris [45]

(ノ◕ヮ◕)ノ*:・゚✧ ✧゚・: *ヽ(◕ヮ◕ヽ)

La NIC 2 define los inventarios como activos que son: mantenidos para la venta en el curso normal del negocio, en el proceso de producción para dicha venta, o. en forma de materiales o insumos para ser consumidos en el proceso de producción o prestación de servicios.

4 0
3 years ago
If a firm produces a good and then adds it to its inventory rather than selling it, for the purposes of GDP accounting the firm
fenix001 [56]

Answer:

The statement is true.

Explanation:

Investment expenditure refers to the expenses incurred on account of creating capital assets.

If a good is produced but is left unsold or not used in the production process, then, they result in increased inventory, which is considered as an investment by the firm.

For the purpose of GDP accounting, unsold goods in inventory are treated as purchased by the firm from itself. As such, they form a part of investment expenditure in the accounting period.

8 0
3 years ago
Given the following information and assuming beginning inventory was zero and a periodic inventory system was used, what is the
aivan3 [116]

Answer:

A.  $650 $750 $677

Explanation:

period                 purchases                            sales

1                        20 units at $50                15 units at $60

2                       35 units at $40                35 units at $45

3                       85 units at $30                85 units at $35

total revenue = $900 + $1,575 + $2,975 = $5,450

COGS:

  • using FIFO = (15 x $50) + (5 x $50) + (30 x $40) + (5 x $40) + (80 x $30) = $4,800
  • using LIFO = (15 x $50) + (35 x $40) + (85 x $30) = $4,700
  • cost average = ($4,950 / 140 units) x 135 units = $4,773.21

Gross profit:

  • using LIFO = $5,450 - $4,800 = $650
  • using FIFO = $5,450 - $4,700 = $750
  • using cost average = $5,450 - $4,773.21 = $676.79 ≈ $677
4 0
3 years ago
The financial statement that summarizes the profit-generating activities of a company during a particular period of time is the_
BabaBlast [244]

Answer:

Income statement.

Explanation:

The financial statement that summarizes the profit-generating activities of a company during a particular period of time is the Income statement.

Income statement is one of the most important financial statement used to analyze the financial performance of the company. It show the revenue and expense of the company in the particular period of time. It help the management to understand the profitablity of the company during specified period of time. The other two important financial statement are Balance sheet and statement of cash flow.

4 0
2 years ago
Other questions:
  • How does the Small Business Administration (SBA) categorize some types of insurance needs?
    14·2 answers
  • Which of the following is an example of competing on quick response?A) A firm produces its product with less raw material waste
    11·1 answer
  • On January 2, 2017, a calendar-year corporation sold 5% bonds with a face value of $2500000. These bonds mature in five years, a
    11·1 answer
  • ____________ are collective ideas about what is important, good, and desirable.
    5·2 answers
  • Should stockholder wealth maximization be thought of as a long-term or a short-term goal? For example, if one action increases a
    8·1 answer
  • A budget for a business could best be created in a:
    5·1 answer
  • A producer with only one product has total fixed costs of $15,000 per month. In addition, it cost the producer $100 in variable
    12·2 answers
  • Select the correct answer.
    8·1 answer
  • General Staff immediately come together and begin developing strategies. General Staff Chiefs are: Evaluating staffing and super
    13·1 answer
  • Lloyd Inc. has sales of $450,000, a net income of $36,000, and the following balance sheet:Cash $148,770 Accounts payable $117,4
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!