Turn projected margins into present value by discounting cashflows over time. See why period alignment, rates, and horizons matter in CLV math.
Compared with a simple sum of future margins, discounted CLV multiplies each period by ______.
total revenue to date
a discount factor such as 1/(1+r)^t aligned to the cashflow timing
an average margin across all cohorts only
the cumulative churn through period t
To convert an annual discount rate r to an equivalent monthly rate, use ______.
r_month = r / 12 exactly in all cases
r_month = (1 + r)^(1/12) – 1
r_month = 12 * r
r_month = sqrt(r) – 1
If cashflow projections are in nominal terms that include inflation, the discount rate should be ______.
zero to avoid bias
a nominal rate consistent with the inflation in those cashflows
a real rate regardless of inflation
any positive rate since CLV is relative
When churn is modeled monthly and billing is monthly, discounting should be applied ______.
only to months after payback
annually for simplicity
at the same monthly cadence as the cashflows
once at the end of the horizon only
Imposing a finite CLV horizon (e.g., 24–48 months) primarily helps to ______.
guarantee payback within a year
remove the need for discounting entirely
artificially inflate CLV estimates
limit reliance on uncertain far-future assumptions and sparse data
If customers prepay annually instead of monthly, the CLV (NPV) will generally ______.
stay identical regardless of timing
become undefined without churn
increase because earlier cash reduces discounting drag
decrease because fewer payments are recorded
Under continuous compounding, a cashflow at time t is discounted by ______.
r^t
exp(−r * t)
1 − r * t
1/(1 + r)
A firm’s discount rate for CLV should reflect ______.
a fixed 10% rate for all firms
the ad platform’s target ROAS
the median industry CLV
the opportunity cost and risk of the cashflows being valued
As the discount rate increases, the present value of distant cashflows will ______.
decrease only for the first few periods
remain unchanged
increase uniformly
decrease more sharply than near-term cashflows
If retention and margin stabilize after month T, a terminal-value approximation can use ______.
the simple sum without discounting
a geometric series for steady-state margin and retention beyond T
the maximum monthly margin repeated forever
ignoring all cashflows after T by default
Starter
You recognize the need to discount future margins.
Solid
You align periods and rates and avoid common CLV pitfalls.
Expert!
You handle rate choice, horizons, and sensitivity like a pro.
