Question
You run a TV station. You only have one time slotopen, buthave two shows you are considering and can only pick one. The first is
You run a TV station. You only have one time slotopen, buthave two shows you are considering and can only pick one. The first is you consider seeing if the machinesays"That's a lie!" and put the Maury Show in your time slot. To get the Maury Show, you need to spend $10 million today for TV rights and promotion. You then believe you can make $3 million per year for 5 years starting a year from today. Maury plans to retire at that time so the show would end then. The second option is to instead run the Jerry Springer Show. You would spend $15 million today for TV rights and to pay Steve to come back. You think you would then make $4 million per year for 4 years starting a year from today before Steve would leave show and you would stop airing it. If you have a discount rate or 8%, which show should you put on TV?
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