Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are working for a small specialty catalog retailer. You sell high-end outdoor equipment, specializing in recreational fishing gear. Your company has the opportunity to

You are working for a small specialty catalog retailer. You sell high-end outdoor equipment, specializing in recreational fishing gear. Your company has the opportunity to purchase a competitor who is experiencing financial stress. You have been provided with the following information. Acquisition price: $ 2,250,000 Number of customers acquired: 7,195 Estimated retention rate: 77 % Discount rate: 12 % Based on this information, what would be the MINIMUM annual margin dollars per new customer that would be required to justify the acquisition? Report your answer rounded to the nearest dollar. To solve this problem, first calculate the acquisition cost per customer. Then solve for M (margin dollars) that would make CLV = 0, using the acquisition cost just calculated. As long as the margin dollars are M, the CLV of the acquired customers will acquisition price.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Frank Woods Business Accounting

Authors: Frank Wood, Alan Sangster

9th Edition

0273655523, 9780273655527

More Books

Students also viewed these Accounting questions

Question

=+Why were they effective? How could you continue the campaign?

Answered: 1 week ago

Question

=+Who's your primary audience?

Answered: 1 week ago

Question

=+What do they need to hear?

Answered: 1 week ago