Contact A: Fixed salary component of $50 million for both (combined) with no residual interest in the

revenues.

Contract B: Fixed salary component of $8 million for both (combined) plus a residual of 3% each of

the revenues.

The promoter, Perrymount Productions, will invest a minimum of $12 million of its own money, and

because of its major role in the success of the last film, it will now be paid 18% of the revenues

received from the total box office receipts. Panther continues to receive 65% of the total box office

receipts (out of which comes the royalty payments).

With the new information above, determine the following:

3. What is the break-even point for Panther Productions expressed in terms of (a) revenues received

by that company and (b) total box office receipts - for contracts A and B? Explain the difference

between the breakeven points for contracts.

4. Assume the sequel achieves $280 million in box office revenues. What is the operating income to

Panther under each of the contracts? Comment on the results. Be specific.