Determine increase in the average value of a loyal customer

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A computer manufacturer currently has a 15 percent customer defection rate. Their accounting department estimates the incremental contribution to profit and overhead as 30 percent. Customers purchase computers every four years at an average cost of $1,200.00. In an effort to reduce the defection rate, the company is improving both the quality of its computers and its post-sale service. Determine the increase in the average value of a loyal customer if the defection rate drops to 5 percent.

Reference no: EM13236361

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