question 3. The Return of the Heroes Three years later, Film4 is negotiating for The Return of the Heroes, a sequel to its mega-blockbuster Heroes. This negotiation is proving more difficult than for the original movie. Mainly due to planned special effects the budgeted production cost (excluding payments to the director Cesaro and the stars Moura and Rebello) for The Return of the Heroes is f59 million. The agent negotiating for Cesaro, Moura and Rebello proposes either of two contracts: Contract A: Fixed-salary component of 22 million for Cesaro, Moura and Rebello (combined) with no residual interest in the revenues from The Return of the Heroes. Contract B: Fixed-salary component of 5 million for Cesaro, Moura and Rebello (combined) plus a residual of 10% of the revenues Film4 receives from The Return of the Heroes. Soho Distributions will market The Return of the Heroes. It agrees to invest a minimum of 15 million of its own money with a 3rd d party (ie not in Film4). Because of its major role in the success of Heroes, Soho Distributions will now be paid 25% of the revenues Film4 receives from the total box-office receipts. Film4 receives 50% of the total box-office receipts (out of which comes the 25% payment to Soho Distributions). 1. What is the breakeven point for Film4 expressed in: a) terms of revenues received by that company for contracts A and B? b) total box-office receipts for The Return of the Heroes for contracts A and B? 2. Explain the difference between the breakeven points for contracts A and B. 3. Comment on the riskiness of contracts A and B at a sales level of 200m