ANSWER ALL QUESTIONS AND SHOW WORK FOR A THUMBS UP PLEASE

Planet Fitness, Inc. is a franchisor and operator of fitness centers in 50 states, the District of Columbia, Puerto Rico, Canada, the Dominican Republic, Panama and Mexico. The company is well-known for its $10 basic membership fee, although customers can also sign up for a more expensive $22.99 PF Black Card membership that comes with additional perks, including additional in-store amenities such as hydro-massage beds and affinity partnerships for discounts and promotions.

According to the companys Securities and Exchange Commission 10K filings, as of December 30, 2020, Planet Fitness had 13.5 million members. The company reports that about 60% of its customers are PF Black Card members and the remaining 40% hold basic membership. Data analytics website Second Measure estimates that Plant Fitnesss customer retention rate is about 68%.

Assume that Planet Fitness incurs a variable cost of $3.50 per customer with basic membership and $6.80 per PF Black Card customer. Planet Fitnesss average weighted cost of capital (i.e. its discount rate) is estimated to be around 6%, according to Guru Focus.

1. a) What is the customer lifetime value (CLV) of each customer with a PF Black Card membership? (3 points)

2. b) What is the CLV of each customer with a basic membership? (3 points)

3. c) What was the CLV of the companys total customer portfolio as at December 30, 2020? (4 points)

4. d) What would be the CLV of a customer with basic membership if the monthly retention rate were 60 percent? (2 points)

5. e) What would be the CLV of a customer with basic membership if the monthly retention rate were 90 percent? (2 points)

6. f) Taken together what do the results in (b), (d), and (e) tell you about the impact of customer retention on customer lifetime value? (1 point)