Suppose that Arundel purchases the sequel rights to all 99 movies from Exhibit 7 and chooses to only exercise the rights to the sequels that seem profitable. That is, those hypothetical sequels from Exhibit 7 that have a one-year return greater than 12 percent.1

A. How many sequels would Arundel produce?

B. What is the total PV of net inflows at t=4 from these sequels?

C.What is the total cost at t=3?

D. What is the NPV of producing these sequels?

E. What is the maximum Arundel would be willing to pay for the 99 sequel rights?

Exhibit 7 Estimated Expected Present Values and One-Year Holding Period Returns Based on Data in Exhibit 6 (in millions of dollars) 24 THE EXPERTS SONY PICTURES ENTERTAINMENT c 25 LOOK WHO'S TALKING (TS) 26 WHEN HARRY MET SALLY (C) 27 STEEL MAGNOLIAS (TS) 28 SEE NO EVL: HEAR NO EVIL (TS) 29 THE BEAR (TS) 30 GLORY (TS) 31 LOOK UP (TS) 32 CASUALTIES OF WAR (C) 33 CHANCES ARE (TS) 34 FAMELY BUSINESS (TS) 35 SHE'S OUT OF CONTROL (C) 36 WHO'S HARRY CRUMB? (TS) 37 ADVENTURES OF BARON MUNCHAUSEN (C) 38. TRUE BELIEVER (C) 39 TROOP BEVERLY HILLS (C) 40 TAP (TS) 41 DEEPSTAR SIX (TS) 42 JOHNNY HANDSOME (TS) 43 MUSIC BOX (TS) 44 IMMEDIATE FAMILY (C) 45 LISTEN TO ME (C) 46 PHYSICAL EVIDENCE (C) 47 OLD GRINGO (C) 48 LOVERBOY (TS) 49 SING (TS) 50. WINTER PEOPLE (C) 51 WELCOME HOME (C) 52 ADVENTURES OF MILO AND OTIS (C) 53 THE BIG PICTURE (C) 54 SLAVES OF NEW YORK (TS) 55 EAT A BOWL OF TEA (C) 56 TO KILLA APRIEST (C) \begin{tabular}{rrr} 1.1 & 16.9 & (0.94) \\ & & \\ $105.5 & $14.1 & 6.48 \\ 64.6 & 26.8 & 1.41 \\ 61.7 & 31.0 & 0.99 \\ 32.0 & 25.4 & 0.26 \\ 21.5 & 29.6 & (0.27) \\ 20.8 & 29.6 & (0.30) \\ 13.2 & 24.0 & (0.45) \\ 12.3 & 35.3 & (0.65) \\ 10.9 & 25.4 & (0.57) \\ 10.2 & 25.4 & (0.60) \\ 9.0 & 21.2 & (0.58) \\ 7.9 & 19.7 & (0.60) \\ 7.0 & 73.4 & (0.90) \\ 6.7 & 19.7 & (0.68) \\ 6.5 & 25.4 & (0.74) \\ 6.4 & 21.2 & (0.70) \\ 5.8 & 11.3 & (0.49) \\ 5.0 & 28.2 & (0.82) \\ 4.9 & 25.4 & (0.81) \\ 4.3 & 19.7 & (0.78) \\ 3.8 & 21.2 & (0.82) \\ 3.4 & 24.0 & (0.86) \\ 3.2 & 48.0 & (0.93) \\ 3.2 & 14.1 & (0.77) \\ 2.4 & 19.7 & (0.88) \\ 2.1 & 22.6 & (0.91) \\ 1.7 & 19.7 & (0.91) \\ 1.2 & 11.3 & (0.89) \\ 1.2 & 11.3 & (0.89) \\ 1.2 & 8.5 & (0.85) \\ 1.2 & 2.8 & (0.56) \\ 1.1 & 14.1 & (0.92) \end{tabular} Exhibit 7 (continued) "Net untows consust on al revenues manus associated districution rees and expenses. bOne-year return is defined as: [PV of net inflows minus PV of negative cost] divided by [PV of negative cost]. C= Columbia Pictures; TS=Tr-Star. W= Walt Disney; T= Touchstone