You are considering purchasing a membership to a store that offers bulk discounts to its members. If you expected to save $50 a year (indefinitely) and the market rate was 12%, at what price would you be indifferent to the membership? What if the membership cost $200, how much would you need so save each year to make it worth it?

If the market rate is 12%, then to be indifferent to a store membership that offers bulk discounts, you would need to save $50/12% = $416.67 each year for the membership to be worth it. If the membership cost is actually $200, then you would need to save at least $200/12% = $1,666.67 annually in order for it to be worthwhile compared to not having one.

Therefore, if you are expecting a savings of only $50 per year from this particular store’s discounted rates – and assuming the market rate will remain consistent – then it would not make sense financially speaking to purchase this particular membership. However, if the savings are greater than or equal to approximately 17 times what you paid upfront (or $3,333.34), then it might be more beneficial in terms of long-term ROI.

Ultimately, when considering any type of subscription service that offers discounts based on usage or frequency – such as a members-only store – research should always be conducted beforehand so an assessment can be made as to whether or not these types of services are truly worth their cost.