Customer life time value LTV = M/(1-r + i) - AC M = annual margin customer generates r = 1 - (monthly churn rate times 12 months) = annual retention i = discount rate (use 5% here) rate AC = acquisition cost e.g. What is the impact on customer lifetime value if a firm can increase its annual customer retention rate 50% to 75%, if annual sales per customer are 400, gross margin = 30%; 8 the firm spends an average of 80/customer to acquire customers