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The marketing manager for Custom Garage Doors Inc looks at the following problem: the NPD team has suggested a new flexible product, which can be developed at a cost of $100 per client. She knows that an average customer stays for three years and spends $100, $110, and $115 in years 1-3 respectively. The non-development cost in each year remains constant at $70. She uses a discount rate of 10% in her decisions. Should she go ahead with this new product, and why? (Technical issues: The LTV is defined as the value at Jan 1st, Year 1, 0:00:01 am; assume all payments happen at Dec 31st of the year in which they occur at 11:59:59 pm; assume acquisition costs occur in Year 1 at 0:00:01 am)

Financial Management, Finance

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