Two equal LTVs could results in pretty different NPV results depending on the expected lifetime, and using both averages for the discount definitely has some error.
That's a good point. I'm reminded of von Neumann's quip that
"with four parameters I can fit an elephant, and with five I can make him wiggle his trunk."
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Regarding ...
Shouldn't the calculation factor in the time value of the money over the estimated life time?
https://en.wikipedia.org/wiki/Time_value_of_money
It's a pure summative estimate, as I understand it.
I imagine that it's taken as the input for a net present value calculation by many investors.
Two equal LTVs could results in pretty different NPV results depending on the expected lifetime, and using both averages for the discount definitely has some error.
That's a good point. I'm reminded of von Neumann's quip that "with four parameters I can fit an elephant, and with five I can make him wiggle his trunk."