What would be the upper limit of this investment

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Reference no: EM133569869

Question 1. A marketer of a product is willing to invest in the acquisition of new customers for two years. What would be the upper limit of this investment, per customer, assuming the following retention/attrition rates (see table below) and assumptions? Should the marketer spend an additional $7.00 per month to increase the retention rate by 1% per month (e.g., 97 instead of 96 or 76 instead of 75)?

Assumptions:
o Revenue per customer per month=$250
o Payments are made at the end of the month
o Annual internal rate of return of 18% compounded monthly

Month	Retention/Attrition Rate
Month 0	100
Month 1	96
Month 2	94
Month 3	92
Month 4	90
Month 5	88
Month 6	85
Month 7	83
Month 8	81
Month 9	79
Month 10	77
Month 11	75
Month 12	73
Month 13	72
Month 14	71
Month 15	70
Month 16	68
Month 17	67
Month 18	66
Month 19	65
Month 20	64
Month 21	63
Month 22	62
Month 23	61
Month 24	60

Reference no: EM133569869

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