Calculating LTV

Customer A spends $$1,300$ this year at your firm. What is the LTV in $5$ years out? Assume

$6\%$ interest rates and a $100\%$ probability of retention.

a$.$ What is the answer with a non$-$constant cash flow?

b$.$ What $s_{{?}_{?}}$ the answer with constant cash flow?

Your firm has the following probabilities of retention $($from the previous year$)$ for

someone who first shops in your store in year X :

a$.$ What is the overall probability of someone from year $0$ remaining through year $7?$

b$.$ Use this table to provide a more correct answer to question $1$a$.$

Your firm finds that using a rolling three$-$year average is the most accurate input for LTV$.$

A customer spent $$500$ two years ago, $$100$ last year, and $$600$ this year. Using a $5\%$ interest

rate, what is the LTV for five years out, assuming full retention?