How do you estimate conversion rate / user acquisition cost?

OK, we all know that user acquisition cost is how much money you spent to get 1 customer. But my question is how do you get to that number?
To give a real case example: Bob has $100 to spend on targeted keyword advertising every month. He bids $0.10/click and receives 1,000 targeted clicks per month. Question is – how can you safely estimate what percentage of those visitors will sign-up for a service? Is it 1 (0.1%)? Is it 5 (0.5%)? Is it 10 (1%)?
If you were to estimate revenue projections for 12-36 months ahead in your business plan, you would need that information as its critical to see what user growth us. So how do you get that conversion percentage? Do you just guess it?
Thanks for any insight.

Original post by Artashes