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1?. Uncertainty, CVP analysis. Angela King is boxer Mike Foreman's agent in Las Vegas. King is promoting another Foreman's fight at the world boxing championship.
1?. Uncertainty, CVP analysis. Angela King is boxer Mike Foreman's agent in Las Vegas. King is promoting another Foreman's fight at the world boxing championship. Its main uncertainty is related to the size of the individual paid cable television market for each programme watched. King will pay Foreman a fixed amount of $2 million, plus 25% from revenue from cable television. Each family connected to cable television watching the event will pay 529.95, of which King will take 316. King will pay Foreman 25% of this 516. King estimates the next probability distribution of the number of families who will buy the event broadcast by cable television. Demand Probability 100.000 0, 05 200.000 0,10 300.000 0,30 400.000 0,35 500.000 0, 15 1.000.000 0,05 Request: 1. What is the expected value of the rights King will pay Foreman? 2. Suppose that the only uncertainty is related to the demand of cable television for the event. King wants to know what the breakeven point is given by its own fixed costs of $1 million and $2 billion per family watching the event. (Include in your calculations and the amounts paid by King's Foreman.)
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