It's 2019 and you're thinking about buying Netflix stock. As a prudent investor, you do some math. As a first step, you calculate the lifetime value of a typical Netflix subscriber. You know that a Netflix subscription cost is $15/month on average. From SEC filings you learn that the retention rate is 90% and that the cost of serving a user is $9/month. a) You calculate the absolute CLV looking at a five-year horizon with an interest rate of i=0.1. (You assume that churn happens at the end of each year and you only consider the earnings from the first five years of a customer's lifetime) b) In 2020 COVID-19 hits, and among all the bad news there comes one piece of good news: your Netflix stock is doing well because many new customers sign up. Being cautious, you try to figure out if the spike in the stock price is realistic or it overvalues the increasing customer-base. Analysts predict that customers who join in 2020 will churn with a 35% probability at the end of the first year. Those who continue to remain subscribers churn with 25% probability at the end of each subsequent year. In other words, the retention rate changes (becomes higher) after the first year. What is the absolute CLV of these new subscribers joining in 2020 on a 5-year horizon with i=0.1? c) In 2021 things are getting back towards normal, new customers who join this year have a churn probability of 20% at the end of every year of their lifetime. You realize that retirement is still a long time away so you plan to hold the stock for a long time. Hence you calculate CLV in perpetuity. But inflation is also up, so you use i=0.2. What is the absolute CLV of customers who join in 2021 if calculated in perpetuity with i=0.2? d) The post-COVID reduction in streaming demand puts Netflix in a challenging position and they decide to introduce a new subscription type with ads at the cost of $7/month. Ads are annoying hence customers under this ad supported plan have a somewhat higher churn rate of 25% at the end of each year. What is the minimum monthly ad revenue Netflix has to realize per customer if the goal is to have the same or higher CLV as for customers in question c)? As in part c) calculate CLV in perpetuity and use i=0.2. The cost of serving both type of users is the same, $9/month and the only source of revenue are subscription+advertising.