Question

On the other side of the street is a community runladies-only gym, called sculptress. sculptress hasbranches throughout the city and spends anaverage of $50 per member on local mediaadvertising. their policy is to provide aninexpensive, friendly, no frills service. as such, forthem to be successful, they need to have lots ofmembers. sculptress's profits are $600 percustomer per year for an average of 3 years. theyassume that they will lose 5% of their memberseach year and use a 10% discount rate per year toaccount for the time value of money. forsimplicity, sculptress assumes all profits areaccrued at the beginning of the year.

What is Sculptress's assumed annual profit per customer?
A. $600
B. $550
C. $500
D. $450

Answer 1

Sculptress's assumed annual profit per customer is $600, which is the initial figure provided without adjustments for member loss or discount rate.

Step-by-step explanation:

The assumed annual profit per customer for Sculptress, a ladies-only gym, is $600. This figure is based on their profits of $600 per customer per year and is not adjusted for the 5% loss of members or the 10% discount rate, as those factors are additional considerations not directly affecting the basic annual profit per customer figure.

When calculating the net present value or considering member churn, those percentages would come into play, but for the simple annual profit per member, it remains at $600.