Sally€™s Mountaineering Supply sells hiking and climbing equipment to sporting goods and specialty hiking retailers. They recently began ranking their customers based on their expected lifetime profitability in order to segment customers for various customer relationship initiatives. Three of their customers are shown below.      

Use a discount rate of 4 percent and treat the average sales figures as annuities.

a. Calculate the customer lifetime values for the three customers.

b. Which customer is the most valued? Should they segment the customers?

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Avg. Profit Margin Avg. Annual Sales Expected Lifetime 6 years Customer A: $108,000 18 % 22 % 15 years Customer B: $82,000 26 years 31% Customer C: $29,000