A cable provider charges a $30 per month subscription fee. Variable costs are $12 per month and marketing spending is $3 per month per customer. The customer attrition rate is 2% per month leading to a retention rate of 98% per month. The employee attrition rate is 4% per month leading to an employee retention rate of 96% per month. Assume a discount rate of 12% per year. What is an average customer worth to the cable provider? (CLV)
$M: Contribution Per Period from Active Customers
Contribution = Sales Price - Variable Cost
$R: Retention Spending per Period per Active Customer
r: Retention rate (fraction of current customers retained per period)
d = Discount rate (cost of capital) per period
CLV = [M - R] * (1 + d) / (1 +d - r)
PLEASE WRITE YOUR ANSWER WITHOUT A $ SIGN or a COMMA IN THE NUMBER