Predetermined annual price

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Reference no: EM131015677

Pivotal's Spinnaker software at a predetermined annual price of $ 450 M. Currently Netflix uses Amazon's AWS product and pays $ 400 M annually, but each year this value can go up 20% or down 10% in comparison with the previous year. Over the next three years at the beginning of each year Netflix can decide, which product, Spinnaker or AWS, it will be using that year. Which product should the company use each year? If the risk-free rate is 3%, how much this agreement is worth to Pivotal?

Reference no: EM131015677

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