Find out the customer lifetime value using the following information and a discount rate of 12%.
Average Annual Sales = $119,025 (treat the average sales as annuity)
Average Profit Margin = 11%
Expected Lifetime in Years = 8
A)$14,283
B)$65,040
C)$119,025
D)$13,092
E)Do not have enough information to compute

Question

Quizplus · Accepted Answer

The customer lifetime value (CLV) is calculated by finding the present value of the profit generated over the expected lifetime. First, calculate the annual profit: $119,025 * 11% = $13,092. Then, calculate the present value of this annuity using the formula for the present value of an annuity: PV = Pmt * [(1 - (1 + r)^-n) / r], where Pmt = $13,092, r = 0.12, and n = 8. This results in a CLV of approximately $65,040.

Find Out the Customer Lifetime Value Using the Following Information