Case Study #2: Complete One of the Case Studies in This Sec- tion. Case Study #2a (Arundel Partners): DCF and ROA in the Movie Industry. The media and communications consulting firm that you work for, Paul Kagan Associates, has been hired by an investment group to assess the financial soundness of a proposed investment fund. This fund, known as Arundel Partners, would invest in a sizeable portfolio of "sequel rights to movies before those movies would even be made. Your boss, David A. Davis, has asked you and your analyst team to analyze the merits of the proposed fund and to give guidance on the valuation of sequel rights". Among (potentially) other things, you should focus on the following questions: The Fund's Value Proposition: Why do the principals of Arundel Partners even think they can make money buying movie sequel rights? Why do the partners want to buy a portfolio of rights in advance of non-sequel movie production rather than negotiating film-by-film for these rights after the first movies are made? Valuation: Estimate the per-film value of a portfolio of sequel rights such as Arundel proposes to buy. Do so using both DCF and Real Options Analysis (ROA). What are the primary advantages and disadvantages of each approach and what additional data would you require to refine your estimate of the rights' value? Be more detailed (and instructional) with the ROA analysis since part of the goal of your feedback is informing your audience on the merits of valuing real options in corporate finance. A Pitch for ROA: Building on your previous answer, provide a pitch for why Arundel should, at least, partially consider ROA in their decision-making. Other Concerns: What problems or disagreements would you expect Arundel and a major studio to encounter in the course of a relationship like that described in the case? What contractual terms and provisions should Arundel insist on? Keep in mind that your findings will be presented to Mr. Davis and not the client. With that said, try to make this talk as useful as possible to help Mr. Davis prepare for the presentation he will eventually give to the client