Problem:
What is the customer lifetime value of customer Peter Piper for the first three years of the customer relationship?
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Initial acquisition cost
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$700
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n = number of years retained
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3
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r = retention rate for each of the n years retained
|
0.8
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Cost of capital
|
0.1
|
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M1 Margin from customer in year 1
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$500
|
|
M2 Margin from customer in year 2
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$600
|
|
M3 Margin from customer in year 3
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$650
|
|
c1 cost
|
$120
|
|
c2 cost
|
$100
|
|
c3 cost
|
$100
|
Additional Information:
This question is basically belongs to the Finance as well as it discusses about computation of present value and customer life time value.