Posted: December 5th, 2022
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DO A VALUATION WHERE YOU ASSUME THAT ARUNDEL WILL ALWAYS MAKE A SEQUEL. USE DATA FROM EXHIBIT #7 (USE THE FULL SAMPLE) AND DISCOUNT RATE OF 12%. HOW MUCH SHOULD ARUNDEL BE WILLING TO PAY FOR A SEQUEL RIGHT? DISCOUNT RATE= 12%. Cause Arundel’s tax situation might be exceedingly complex, David Davis was asked to estimate the value of the sequel rights on a pre-tax basis. He had access to data such as that in Exhibits 6-9 as well as the larger, more detailed dataset at Paul Kagan Associates. There were two obvious ways to begin analyzing the data. One was to use the projected financial performances of all the 1989 hypothetical sequels to decide which ones should be produced. Then it would be possible to estimate how much money they would make in total, and hence, how much per 1989 first film. The other approach would be to apply a simple option pricing model to the parameters of the distribution of sequel returns or sequel NPVs and so estimate directly the value of sequel rights for a random film in the available sample. Need these few questions answered, supporting document is attached.
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