How much are you worth to agiven company if you continue to purchase its brand for the rest of your life?Many marketers are grappling with that question, but it’s not easy to determinehow much a customer is worth to a company over his or her lifetime. Calculatingcustomer lifetime value can be very complicated. Intuitively, however, it canbe a fairly simple net present value calculation. To determine a basic customer lifetimevalue, each stream of profit is discounted back to its present value (PV) andthen summed. The basic equation for calculating net present value (NPV) is: Where, t - time of the cash flow N - totalcustomer lifetime r - discount rate C t - net cash flow (the profit)at time t (The initial cost of acquiring a customer would be a negativeprofit at time 0.) NPV can be calculated easily on most financial calculators or by using oneof the calculators available on the Internet, such as the one found at http://www.investopedia.com/calculator/NetPresentValue.aspx .For more discussion of the financial and quantitative implications of marketingdecisions, see Appendix 2, Marketing by the Numbers. 1 Assume that a customer shops at a local grocery store spending an averageof \\\$150 a week and that the retailer earns a 5 percent margin. Calculate thecustomer lifetime value if this shopper remains loyal over a 10-year life-span,assuming a 5 percent annual interest rate and no initial cost to acquire thecustomer. 2 Discuss how a business canincrease a customer’s lifetime value.