-Using a discount rate of 15% and treating the average annual sales as annuities, calculate the present value of Customer Two's lifetime value.
A)$25,627
B)$23,754
C)$20,729
D)$19,251
E)Do not have enough information to compute

Question

-Using a discount rate of 15% and treating the average annual sales as annuities, calculate the present value of Customer Two's lifetime value.
A)$25,627 
B)$23,754 
C)$20,729 
D)$19,251 
E)Do not have enough information to compute

Quizplus · Accepted Answer

The present value of Customer Two's lifetime value is $25,627. This is calculated by taking the average annual sales of $5,000 and dividing it by the discount rate of 15%. This gives us a present value of $33,333. We then need to subtract the initial investment of $7,706 to get a present value of $25,627.

-Using a Discount Rate of 15% and Treating the Average