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_..J_.._ J .t.......... ..._.....g_ .._..-.. .._.. .._.,. .__.____.:.. _..J_.._ Problem #2 -S oti Contract Decision Anal sis Spotify Technology S.A. ($SPOT) is a music streaming company that recently transitioned into a
public company through a direct listing. Their stock’s opening price on the first day of trading was
$165.90, and at market close of the first day it had dropped down to $149.60. A few months after the
direct listing the company released its first quarterly earnings report, and the results weren’t positive.
Analysts expected the company to have earnings of ($0.33)/ share, and Spotify reported ($1.01)
lshare, representing a (206.06%) surprise (Source: Considering their poor start,
company executives have rolled out several new subscription plans to replace the old ones in order to
increase revenue and satisfy shareholders. Since you do not know with certainty the number of songs
you will be adding to your library each month, you decide to construct a payoff table of decisions for
several states of nature for your total annual costs. This will help you choose a new subscription.
Round the calculations for the payoffs to the nearest cent ($0.01). ~Irv
Cost per new song Student discount (applied to both
Scenarios Monthly _cost 0f added to your the subscription and cost per
subscrlptron .
library added song)
Bronze $2.00 $0.50 10%
Silver $4.50 $0.20 20%
Gold $8.00 $0.05 30%
Platinum $10.00 $0.01 35%
J Complete the Payoff Table ‘ Songs added per month
Scenario 5 10 20 35 50
Platinum Hint: Be careful of the different units of time stated in the problem. Remember each scenario is to be
calculated for a total yearly cost.
Hint: In a payoff table, revenues are positive and costs are negative.

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