A Firm Offers Group Discount for Orders Exceeding 15

Multiple Choice

A firm offers group discount for orders exceeding 15.Two firms are taking advantage of this offer.Sales to Company A averages $15, 000 of annual sales, has a 22% profit margin and an expected lifetime of 8 years.Company B averages $11, 000 of annual sales, has a 25% profit margin and an expected lifetime of 9 years.Which is the more important customer based on the higher expected lifetime value? Assume a 7% discount rate.

A) Company A because its' NPV = $17917
B) Company A because its' NPV = $19705
C) Company B because its' NPV = $21,224
D) Company B because its' NPV = $22,349