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AOL bought customers from CD Now for $60 per customer. CD Now's annual retention rate was 60 percent, and customers generated $15 of profit per
AOL bought customers from CD Now for $60 per customer. CD Now's annual retention rate was 60 percent, and customers generated $15 of profit per year. Assuming an annual discount rate of 12 percent. Also assume that the customers sign a contract at the start of their new relationship for one year and make a payment at the start of every time period.
Evaluate AOL's purchase of CD Now customers. Will it recover the money spent on acquiring these customers? Specify which formula you use for answering this question
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