Exam 5: Customer Relationships and Customer Service

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Find out the customer lifetime value using the following information and a discount rate of 6%. Average Annual Sales = $7,500 (treat the average sales as annuity) Average Profit Margin = 8% Expected Lifetime in Years = 7

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  -Using a discount rate of 12% and treating the average annual sales as annuities, calculate the present value of Customer Two's lifetime value. -Using a discount rate of 12% and treating the average annual sales as annuities, calculate the present value of Customer Two's lifetime value.

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Lafayette Landscaping Company sells mulch to local businesses and residential customers. Lafayette has decided to begin calculating the expected lifetime profitability of each of their premier customers in order to design marketing promotions. Their top-three customers have the following characteristics: Lafayette Landscaping Company sells mulch to local businesses and residential customers. Lafayette has decided to begin calculating the expected lifetime profitability of each of their premier customers in order to design marketing promotions. Their top-three customers have the following characteristics:    -Using a discount rate of 16% and treating the average annual sales as annuities, calculate the present value of Amherst's lifetime value. -Using a discount rate of 16% and treating the average annual sales as annuities, calculate the present value of Amherst's lifetime value.

(Multiple Choice)
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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

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  -Using a discount rate of 11% and treating the average annual sales as annuities, what would the average profit margin have to be for Customer A to have a customer lifetime value equal $300,000? -Using a discount rate of 11% and treating the average annual sales as annuities, what would the average profit margin have to be for Customer A to have a customer lifetime value equal $300,000?

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Find out the customer lifetime value using the following information and a discount rate of 15%. Average Annual Sales = $287,000 (treat the average sales as annuity) Average Profit Margin = 16% Expected Lifetime in Years = 19

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  -Using a discount rate of 12% and treating the average annual sales as annuities, calculate the present value of Customer One's lifetime value. -Using a discount rate of 12% and treating the average annual sales as annuities, calculate the present value of Customer One's lifetime value.

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  -Using a discount rate of 10% and treating the average annual sales as annuities, calculate the present value of Customer One's lifetime value. -Using a discount rate of 10% and treating the average annual sales as annuities, calculate the present value of Customer One's lifetime value.

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Find out the customer lifetime value using the following information and a discount rate of 4%. Average Annual Sales = $6,700 (treat the average sales as annuity) Average Profit Margin = 13% Expected Lifetime in Years = 9

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  -Based on the calculation of lifetime value in Questions 14 and 15, which customer is more important? -Based on the calculation of lifetime value in Questions 14 and 15, which customer is more important?

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