Homework Answers
present value of retained amount = 100/1.12 + 100/1.12^2 + 100/1.12^3 = 240.18
expected value of new subscriber
= probability of retaining * present value of retained amount + probability of not retained * value of not retaining
= 0.3 * 240.18 + 0.7 * -20
= 58.05
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