-Using a discount rate of 10% and treating the average annual sales as annuities, calculate the present value of Customer One's lifetime value.
A)$22,887
B)$15,836
C)$32,604
D)$33,000
E)Do not have enough information to compute

Question

-Using a discount rate of 10% and treating the average annual sales as annuities, calculate the present value of Customer One's lifetime value.
A)$22,887 
B)$15,836 
C)$32,604 
D)$33,000 
E)Do not have enough information to compute

Quizplus · Accepted Answer

The present value of Customer One's lifetime value is $22,887. This is calculated by taking the average annual sales of $3,260 and dividing it by the discount rate of 10%. This gives us an annual annuity of $326. We then multiply this annuity by the present value factor for 10 years, which is 6.14457, to get the present value of $22,887.

-Using a Discount Rate of 10% and Treating the Average