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Spectrum is an internet service provider that charges its 4 million customers $19.95/month for its service. The company's variable costs are $0.75 per customer per month. In addition, the company also spends $1.50 per month per customer on a customer loyalty program designed to retain customers. As a result, the company's monthly customer retention rate is 78.8%. Spectrum has a monthly discount rate of 2%.

A. What is the customer lifetime value?

B. Suppose the company wanted to to increase its customers' monthly retention rate and decided to spend an additional $0.30 per month per customer to upgrade its loyalty program benefits. By how much must Spectrum increase its monthly customer retention rate to avoid reducing customer lifetime value caused by a lower customer margin?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92693338

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