Jason Knight, the circulation manager at the Wall Street Journal, wants to run a promotional offer, targeted at graduating MBA students, to recruit more readers for its Digital Edition. The annual subscription price for the Journal is $60 ($5 per month). Although the marginal cost of servicing an additional customer in zero for the digital edition, there are some variable costs related to invoicing, collection fees, etc. The variable cost to service each customer is 50 cents per month. Management expects a profit margin of 40% from each customer. If the churn rate is 40% (i.e., the Journal loses 40% of its customers every year), what is the maximum amount that Knight can spend to acquire a new customer?

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