Mark has just become a customer of Davids Computer Store. Each year it is expected Hana will buy on average $1000 worth of computer stuff on which Yufeng makes a 60% margin. Yufeng believes an accurate estimate of Hana retention rate is 75%. (limit: 1 total page)

1. What is the expected lifetime value of Mark to David? Assume the interest rate is 0%. Show your work.

2. Should David spend $400 today to increase Hanas retention rate to 85%? Explain.

3. Would David be better off spending the $400 to increase Marks yearly spending to $1500? Explain.

4. If the interest rate were 10% rather than 0%, what would be your answers to the above 3 questions? Show your work.