-Using a discount rate of 7% and treating the average annual sales as annuities, calculate the present value of Customer One's lifetime value.
A)$27,000
B)$25,617
C)$11,085
D)$33,000
E)Do not have enough information to compute

Question

-Using a discount rate of 7% and treating the average annual sales as annuities, calculate the present value of Customer One's lifetime value.
A)$27,000 
B)$25,617 
C)$11,085 
D)$33,000 
E)Do not have enough information to compute

Quizplus · Accepted Answer

The present value of Customer One's lifetime value is $25,617. This is calculated by taking the average annual sales of $5,000 and dividing it by the discount rate of 7%. This gives us a present value of $71,429. We then need to multiply this by the number of years that the customer is expected to be a customer, which is 5 years. This gives us a present value of $25,617.

-Using a Discount Rate of 7% and Treating the Average