Notime Wonder Cable Company

StarBeam

Cable Company

spends an average of $678 to acquire a customer. Annual maintenance

costs per customer are $45. Record keeping and billing costs $30 per customer per year. The

price

of a basic service package is $30 per month. Typically, 60% of the customers buy a premium

package called DTV (which includes basic service) at $60 per month and 10% buy cable modem

service as well for an additional $40, for a total of $100 per mont

h. Over time, 80% of customers

remain with the company from one year to the next.

ASSUME A DISCOUNT RATE OF 12%

(a) What is the lifetime value of an average customer?

(b) What is the lifetime value of a cable modem custom