You are the controller of Wolf Media Corp. (Wolf), a publicly owned Canadian company.

Wolf's operations include television production, live theatre production, and interactive

media. The company built its reputation on providing high-quality, educational, family

entertainment showcasing multiple languages and cultures. The company has total

assets of $110 million, but due to the recent economic downturn, Wolf's share price has

been falling. This is concerning, as the company plans on doing a new share offering in

the near future. It is hoped that its recent signing of a new musical production,

Dragon

Dreams,

will help turn things around.

One of the members of Wolf's Board of Director's saw the world-famous family musical

show

Dragon Dreams

in London, England, last year. He put Wolf's theatrical production

division general manager, John Narle, in touch with

Dragon Dreams

' producer, and a

deal was quickly signed giving Wolf full Canadian licensing rights to the production for

the next five years. While the show ran for three years in England and achieved a four

out of five star critic and press rating, Wolf management would be happy to see the

production last for two years in Canada. Wolf's share price increased by 10% as soon

as the deal was announced.

The production is still six months away from being completed and Wolf started selling

tickets two months ago. The tickets are refundable only if the production is cancelled.

The first 10 weeks of the show's run are completely sold out. Average ticket prices are

$65, the theatre used for the production has 1,000 seats, and the show will run seven

nights a week. As at December

31, 2019, the company had invested $12 million in pre-

production costs. The company expects to spend another $1.5 million prior to opening

night and will incur weekly production costs of $425,000 once the show opens.

Advertising is budgeted to be $1.2 million annually.

It is now one month after the company's year end. You are preparing for the monthly

meeting of the board of directors. You know that the board is expecting an analysis of

Dragon Dreams

and wants to know whether Wolf should still proceed with the show.

Some board members are starting to worry that it is too high a risk. The board is also

very interested in designing financial and non-financial performance measures to

evaluate the performance of the theatrical production division and its general manager.

Prepare the relevant information for the board.

1. Perform a payback period analysis