Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A British television production company, RIP Lizzy, is producing a new TV series they want to sell to an American content distributor. They are targeting

A British television production company, RIP Lizzy, is producing a new TV series they want to sell to an American content distributor. They are targeting HBO, Netflix, or Amazon Prime. They need to figure out the lowest price they can accept to make a 21% return on their series.

 

Conditions and Information

  • The series will run 8 episodes each season for 5 seasons.
  • The actor's salary total $1.3m per episode.
  • RIP Lizzy has fixed costs of $190,000 per year.
  • The operational costs (variable) to build and film scenes is $800,000 per episode.
  • RIP Lizzy need editing and filming equipment totaling $1,500,000 that will be depreciated straight-line to zero-salvage over the five years.
  • They can sell the equipment for $300,000 at the end of the fifth year.
  • They also need to invest $110,000 in working capital to cover daily expenses and actor requests (e.g., food, make-up, and wardrobe).
  • The relevant tax rate is 18%.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

To calculate the lowest price RIP Lizzy can accept to make a 21 return on their TV series we need to determine the present value of all cash inflows revenue and outflows costs and investments over the ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Global Strategy

Authors: Mike W. Peng

5th Edition

0357512367, 978-0357512364

More Books

Students also viewed these Finance questions

Question

Why has the FCPA not ended corruption in global business?

Answered: 1 week ago