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taurus [48]
3 years ago
11

Tire manufacturer Firebridge sells tires to retail firm A. Average annual sales for firm A is $55,000. Average profit margin is

15%. The expected lifetime is 10 years. Using a discount rate of 15 percent, calculate the Customer Lifetime Value of firm A and choose the closest answer below: 1) $5,500 2) $38,590 3) $41,405 4) $25,675
Business
1 answer:
ahrayia [7]3 years ago
3 0

Answer:

The Customer Lifetime Value of firm A amounts to $41,405. Hence, the correct option is 3

Explanation:

The formula to compute the Customer Lifetime Value of firm A is:

Customer Lifetime Value of firm A = Average annual sales × Average Profit Margin × Uniform series PW ( Present Worth) factor

= $55,000 × 15% × 5.0188

= $41,405

where

Average annual sales is $55,000

Average Profit Margin is 15%

We need to find out this:

The formula to compute this:

Uniform series PW factor = ( 1 + i%) ^ n - 1 / i % × ( 1 + i%) ^ n

                                          = ( 1 + 15%) ^ 10 - 1 / 15% × ( 1 + 15%) ^ 10

                                          = (1.15 ^ 10 -1) / (0.15 × 1.15 ^10)

                                          = 5.0188

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3 years ago
Linda Clark received 175,000 from her mother's estate. She placed the funds into the hands of a broker, who purchased the follow
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Yes, Linda earns a 16% rate of return.

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Common stock

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Preferred stock

Dividends paid (6% x $30,000 x 3 years)

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Answer:

perceived value

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