Question
Net-4-You is an Internet Service Provider that charges it 1 million customers $19.95 per month for its service. The company variable costs are $.50 per
Net-4-You is an Internet Service Provider that charges it 1 million customers $19.95 per month for its service. The company variable costs are $.50 per customer per month. In addition, the company spends $.50 per month per customer, or $6 million annually, on a customer loyalty program designed to retain customers. As a result, the company monthly customer retention rate was 78.8 percent. Net-4-You has a monthly discount rate of 1 percent.
A) what is the customer lifetime value?
B) Suppose the company wanted to increase its customers monthly retention rate and decided to spend an additional $0.20 per month per customer to upgrade its loyalty program benefits. By how much must Net-4-You increase its monthly customer retention rate so as not to reduce customer lifetime value resulting from a lower customer margin?
Your submission for the financial exercises should be formatted in two columns. The first column should contain the answer to the question The second column should hold your computations and any explanatory comments.
Round your answer to 4 decimal places. Report the required percent change i.e. the delta between the old and new values of r.
Thanks!
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