The monthly bill for the average Verizon customer is about $75. Verizon incurs an annual cost of $360 per customer toward maintenance costs, etc. Based on a recent analysis of their customer data, they have determined that they lose approximately 10% of their customers each year. Based on a review of their past customers, Verizon has estimated that each new customer is worth approximately $4,900 over their expected purchase lifetime.

1a. What is the expected purchasing life of a new customer for Verizon (over an infinite time period)?

1b.Verizon is contemplating offering customers who switch from other mobile carriers, a prepaid VISA card, as an incentive to acquire them. However, they need to estimate the maximum value of the prepaid VISA card they can offer.

1c.For the next year, assume that the monthly bill and annual costs per customer remained the same. However, Verizon was able to increase lifetime value for each customer to $6,000 and reduce their churn rate to 8%, how much could afford to spend to acquire a new customer next year?