Suppose that Arundel purchases the sequel rights to all 99 movies from Exhibit 7 and exercises every option to produce a sequel. Exhibit 7 provides the average cost (at t=3) and average cash inflow (at t=4) for a sequel. What is the NPV at t=0 of producing a sequel, on average? Discuss. Assume a discount rate of 12 percent here and throughout the assignment. PV of Not Inflows at Year 10 First Film PV of Nogativo Cost at Year 0 Hypothetical Sequel PV of PV of Negative Not inflows Cost at One-Year at Year 4 Year 3 Return One-Year Return Studio/Movie Title 582 82 $8.6 3.2 (0.05) 1.54 $1.1 1.1 $11.3 4.2 (0.90) (0.74) $80.8 48.4 30 2 175 16.6 $353 635 14.1 183 14.1 14.1 $26.9 48.4 10.8 14.0 10.8 14.0 16.1 14.0 118 129 43 2.01 0.00 1.81 0.25 0.54 0.01 (0.49) (0.84) (0.55) (0.90) 0.75 $63.8 44.6 223 146 14.0 132 4.7 3.4 2.7 18 1.1 0.81 (0.30) 0.58 (021) (0.01) 0.28) (0.78) (0.82) (0.82) (0.89) (0.81) 183 212 18 3 15 5 16.9 5.6 82 22 53 1.3 7.5 $538 86 59.1 4.80 10.78 (0.17) 0.85 (022) 0.02 57 ME AND HIM (C) 58 BLOODHOUNDS OF BROADWAY (C) TWENTIETH CENTURY FOX 59 THE WAR OF THE ROSES 60 THE ABYSS 61 WEEKEND AT BERNIE'S 62 SAY ANYTHING 63 SKIN DEEP 64 THE FABULOUS BAKER BOYS 65 MILLENNIUM 66 WORTH WINNING 67 GLEAMING THE CUBE 68 HOW I GOT INTO COLLEGE 69 WHEN THE WHALES CAME WARNER BROTHERS 70 BATMAN 71 DRIVING MISS DAISY 72 TANGO & CASH 73 LEAN ON ME 74 HER ALIBI 75 NEXT OF KIN 78 PINK CADILLAC 77 YOUNG EINSTEIN 78 DEAD-BANG 79 DEAD CALM 80 SECOND SIGHT 81 SEE YOU IN THE MORNING 82 IN COUNTRY 83 COOKIE 84 HOW TO GET AHEAD IN ADVERTISING 85 POWWOW HIGHWAY 86 BERT RIGBY, YOU'RE A FOOL 87 PENN & TELLER GET KILLED 88 CHECKING OUT THE WALT DISNEY COMPANY 89 HONEY, I SHRUNK THE KIDS (W) 90 DEAD POETS SOCIETY (T) 91 THE LITTLE MERMAID (W) 92 TURNER & HOOTCH (T) 93 THREE FUGITIVES (U) 94 AN INNOCENT MAN(T) 95 BLAZE (T) 96 NEW YORK STORIES (T) 97 GROSS ANATOMY (T) 98 DISORGANIZED CRIME (T) 99 CHEETAH (W) $311,5 1012 48.9 29.8 16.8 13.2 10.1 13.6 6.7 7.6 5.8 5.1 3.8 6.4 8.6 8.4 7.5 8.2 8.2 16.1 21.5 129 20.4 43 15.1 9.7 10.8 183 19.4 14.0 5.4 43 14.0 8.6 5.4 (0.51) 2.17 (0.55) (0.22) (0.46) (0.72) (0.80) (0.54) 0.61 0.96 (0.46) (0.05) 0.53 $229.1 77.6 46.7 22.9 15.0 11.7 11.4 10.2 6.4 6.1 4.9 4.4 3.5 2.6 1.4 1.2 1.1 1.1 1.1 $70,5 11.3 77.6 212 282 16.9 26.8 5.6 19.7 12.7 14.1 24.0 25.4 183 225 5.87 (0.40) 0.08 (047) (0.31) (0.58) 0.80 (0.68) (0.52) (0.65) (0.82) (0.86) (0.86) (0.80) (0.78) (0.94) (0.90) (0.85) 7.1 5.6 18.3 11.3 7.1 $145,5 92.5 78.1 71.2 36.3 197 15.0 10.7 7.8 7.8 9.2 $23.7 21.5 21.5 19.4 18.3 18.3 19.4 20.4 12.9 11,8 7.5 5.15 3.30 2.63 2.68 0.98 0.08 (0.22) (0.47) (0.39) (0.34) 0.22 $111.2 744 62.0 54,6 29.1 17.0 14.7 8.2 8.1 7.1 7.1 $31.0 28.2 28.2 25.4 24.0 24.0 25.4 26.8 16.9 15.5 9.9 258 1.64 1.20 1.15 021 (0.29) (0.42) (0.69) (0.52) (0.54) (0.28) (0.08) (054) 1.21 Average: Median Standard deviation $27.7 $10.5 $41.4 $173 $16.1 $10.1 0.67 (0.02) 2.07 $216 $ 8.7 $31.5 $22.6 $212 $13,3 Interquartile range: $6.9 to $343 $10.8 to $20.4 (055) to 0.99 $ 3.4 to $29.1 $14.1 to $26.8 (0.82) to 021 Suppose that Arundel purchases the sequel rights to all 99 movies from Exhibit 7 and exercises every option to produce a sequel. Exhibit 7 provides the average cost (at t=3) and average cash inflow (at t=4) for a sequel. What is the NPV at t=0 of producing a sequel, on average? Discuss. Assume a discount rate of 12 percent here and throughout the assignment. PV of Not Inflows at Year 10 First Film PV of Nogativo Cost at Year 0 Hypothetical Sequel PV of PV of Negative Not inflows Cost at One-Year at Year 4 Year 3 Return One-Year Return Studio/Movie Title 582 82 $8.6 3.2 (0.05) 1.54 $1.1 1.1 $11.3 4.2 (0.90) (0.74) $80.8 48.4 30 2 175 16.6 $353 635 14.1 183 14.1 14.1 $26.9 48.4 10.8 14.0 10.8 14.0 16.1 14.0 118 129 43 2.01 0.00 1.81 0.25 0.54 0.01 (0.49) (0.84) (0.55) (0.90) 0.75 $63.8 44.6 223 146 14.0 132 4.7 3.4 2.7 18 1.1 0.81 (0.30) 0.58 (021) (0.01) 0.28) (0.78) (0.82) (0.82) (0.89) (0.81) 183 212 18 3 15 5 16.9 5.6 82 22 53 1.3 7.5 $538 86 59.1 4.80 10.78 (0.17) 0.85 (022) 0.02 57 ME AND HIM (C) 58 BLOODHOUNDS OF BROADWAY (C) TWENTIETH CENTURY FOX 59 THE WAR OF THE ROSES 60 THE ABYSS 61 WEEKEND AT BERNIE'S 62 SAY ANYTHING 63 SKIN DEEP 64 THE FABULOUS BAKER BOYS 65 MILLENNIUM 66 WORTH WINNING 67 GLEAMING THE CUBE 68 HOW I GOT INTO COLLEGE 69 WHEN THE WHALES CAME WARNER BROTHERS 70 BATMAN 71 DRIVING MISS DAISY 72 TANGO & CASH 73 LEAN ON ME 74 HER ALIBI 75 NEXT OF KIN 78 PINK CADILLAC 77 YOUNG EINSTEIN 78 DEAD-BANG 79 DEAD CALM 80 SECOND SIGHT 81 SEE YOU IN THE MORNING 82 IN COUNTRY 83 COOKIE 84 HOW TO GET AHEAD IN ADVERTISING 85 POWWOW HIGHWAY 86 BERT RIGBY, YOU'RE A FOOL 87 PENN & TELLER GET KILLED 88 CHECKING OUT THE WALT DISNEY COMPANY 89 HONEY, I SHRUNK THE KIDS (W) 90 DEAD POETS SOCIETY (T) 91 THE LITTLE MERMAID (W) 92 TURNER & HOOTCH (T) 93 THREE FUGITIVES (U) 94 AN INNOCENT MAN(T) 95 BLAZE (T) 96 NEW YORK STORIES (T) 97 GROSS ANATOMY (T) 98 DISORGANIZED CRIME (T) 99 CHEETAH (W) $311,5 1012 48.9 29.8 16.8 13.2 10.1 13.6 6.7 7.6 5.8 5.1 3.8 6.4 8.6 8.4 7.5 8.2 8.2 16.1 21.5 129 20.4 43 15.1 9.7 10.8 183 19.4 14.0 5.4 43 14.0 8.6 5.4 (0.51) 2.17 (0.55) (0.22) (0.46) (0.72) (0.80) (0.54) 0.61 0.96 (0.46) (0.05) 0.53 $229.1 77.6 46.7 22.9 15.0 11.7 11.4 10.2 6.4 6.1 4.9 4.4 3.5 2.6 1.4 1.2 1.1 1.1 1.1 $70,5 11.3 77.6 212 282 16.9 26.8 5.6 19.7 12.7 14.1 24.0 25.4 183 225 5.87 (0.40) 0.08 (047) (0.31) (0.58) 0.80 (0.68) (0.52) (0.65) (0.82) (0.86) (0.86) (0.80) (0.78) (0.94) (0.90) (0.85) 7.1 5.6 18.3 11.3 7.1 $145,5 92.5 78.1 71.2 36.3 197 15.0 10.7 7.8 7.8 9.2 $23.7 21.5 21.5 19.4 18.3 18.3 19.4 20.4 12.9 11,8 7.5 5.15 3.30 2.63 2.68 0.98 0.08 (0.22) (0.47) (0.39) (0.34) 0.22 $111.2 744 62.0 54,6 29.1 17.0 14.7 8.2 8.1 7.1 7.1 $31.0 28.2 28.2 25.4 24.0 24.0 25.4 26.8 16.9 15.5 9.9 258 1.64 1.20 1.15 021 (0.29) (0.42) (0.69) (0.52) (0.54) (0.28) (0.08) (054) 1.21 Average: Median Standard deviation $27.7 $10.5 $41.4 $173 $16.1 $10.1 0.67 (0.02) 2.07 $216 $ 8.7 $31.5 $22.6 $212 $13,3 Interquartile range: $6.9 to $343 $10.8 to $20.4 (055) to 0.99 $ 3.4 to $29.1 $14.1 to $26.8 (0.82) to 021