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In order to determine if an investment should be made to reduce churn, a company should...


In order to determine if an investment should be made to reduce churn, a company should compare the cost of reducing churn to _________.

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Answer #1

The present value of the future cash flows which will arise due to churn reduction .

This is similar to a capital budgeting problem. The company needs to decide whether to make an investment in the reduction of churn. For this the company needs to estimate the future cash flows arising from making this investment. The company then calculates the present value of the future cash flows and compares it with the investment to determine if the investment is worthwhile.

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