A retail store sells a popular cosmetic called Devine and the store manager was given $140,000 by the corporate office to improve store performance any wayshe thinks best. The "base case" information is a price of $28 per bottle, a contribution margin of 0.30, a customer defection rate of 17 percent, and arepurchase frequency of five times a year. These improvement funds could be used to (a) increase the contribution margin to 0.39 or (b) reduce the customerdefection rate to 12 percent or (c) increase the repurchase frequency to six times per year. Assume all other variables remain at the base case level for each ofthe three improvement options.Use the Excel template VLC to calculate the VLC for each option and summarize your answers using the table below. Round your answers to the nearest cent.Contribution Repurchase DefectionMargin Frequency Rate0.30517%The0.39517%0.30512%617% $(a)(b)Price$28$28$28(c) $280.30What is the best way to use $140,000 in improvement funds?The best way to use the $140,000 in improvement funds is option (a)$VLC in $45.9156.9552.3855.09 What is the average value of a loyal customer (VLC) in a target market segment if the average purchase price is $80 per visit, the frequency of repurchase isevery month, the contribution margin is 25 percent, and the average customer defection rate is 24 percent? If a continuous improvement goal is set of a 20percent defection rate next year and 18 percent two years from now, what are the revised VLCs over their average buying life? Do not round intermediatecalculations. Round your answers to the nearest dollar.For defection rate = 24%, VLC = $For defection rate =20%, VLC = $For defection rate = 18%, VLC = $316300293

The value of loyal customer (VLC) can be calculated by Calculation of VLC:Formula used:Since option…

Answered: A retail store sells a popular cosmetic…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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ZipCar auto parts store has $88,000 to invest in a project to detect and reduce insier theft in their stores. They have considering investing in one of two alternatives, identified as Y and Z. Z is the higher first-cost alternative, and the incremental initial investment between the two is $22,000 and will exhibit a rate of return of 12% per year. Z requires an investment of $88,000. They expect a rate of return on the $88,000 investment of 49 percent. Answer the following questions; (a) what is the size of the investment required in Y?, and, (b) what is the rate of return on Y? The size of the investment required in Y is $ The rate of return on Y is %.
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