Q1) XYZ company wants to calculate the CLTV of a customer who is expected to generate a net profit of $4,800 for 19 years. (Gross Sales of $15,000 per year and a margin of 32%)

margin = (SP -VC)

SP

Determine the CLTV for the client in the four ways using the following additional information:

Easy Method

Simple Formula (assume a 10% churn)

Traditional formula (using 10% churn and an interest rate of 12%)

Alar, in finance, calculated the client would bring in net returns of $4,800 at the end of every year for 19 years and agreed to use a cost of money of 12% compounded annually. Find the CLTV using this method and the $4,800 as a net profit.

Based on your calculations of CLTV, explain what this means and how this information could be used by the company in the future. (Alar in finance, is very reluctant to spend a couple of thousand of dollars in promotions or perks to maintain this clientis he right-why?)