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Please state the answer for the question stated below: 4. One of the new concepts we have covered in this case is profit potential. It

Please state the answer for the question stated below:

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4. One of the new concepts we have covered in this case is profit potential. It is sometimes called lifetime value of a customer. The case talks about two methods to compute profit potential. To concretize our understanding of these two methods to compute we will analyze the following two numerical examples. a) Assume RBC has only three segments of customers based on age: (1) 20 to 35 years old, (2) 36 to 60 years old, and (3) 61 to 75 years old. The distribution of average annual customer profitability in dollars for each of the three segments is given in Table TN-A below. What is the profit potential or lifetime value of the niece if the bank estimates that she is in the 30th percentile for current profitability? Recall that the niece is currently aged 23. Use a discount rate of 8% and the first method described at the bottom of page 12 of the case. Assume that there is a 5% chance of customer attrition each year. Table TN-A Average annual customer profitability distribution Percentile 20-35 years old36-60 years old61-75 years old 10 -300 -100 100 20 -250 0 300 30 -100 500 900 40 -50 700 1, 300 50 0 900 1, 700 60 50 1, 100 2, 000 70 100 1, 300 2, 300 80 200 1, 500 2, 500 90 300 1, 700 2, 700 100 450 1, 900 2, 900

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