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:

Question

Quizplus · Accepted Answer

To calculate customer lifetime value, we can use the formula: 
CLV = Annual sales x (Profit margin / (1 + Discount rate - profit margin)) x Customer lifespan

Substituting the values given, we get: 
CLV = 55,000 x (0.15 / (1 + 0.15 - 0.15)) x 10 = $41,405

Hence, the closest answer is C.

Tire Manufacturer Firebridge Sells Tires to Retail Firm A