Find out the customer lifetime value using the following information and a discount rate of 11%.
Average Annual Sales = $168,075 (treat the average sales as annuity)
Average Profit Margin = 14%
Expected Lifetime in Years = 14
A)$164,287
B)$168,075
C)$110,968
D)$23,531
E)Do not have enough information to compute

Question

Quizplus · Accepted Answer

To calculate the customer lifetime value (CLV), we use the formula for the present value of an annuity: CLV = (Average Annual Sales * Profit Margin) * [(1 - (1 + r)^-n) / r], where r is the discount rate and n is the expected lifetime. Substituting the given values: CLV = ($168,075 * 0.14) * [(1 - (1 + 0.11)^-14) / 0.11] = $164,287.

Find Out the Customer Lifetime Value Using the Following Information