Young screenwriter Carl Draper has Just finished hls first script. It has action, drama, and

humor, and he thinks It will be a blockbuster. He takes the script to every motion picture

studio in town and trles to sell it but to no avall. Finally. ACME studios offers to buy the

script for elther $$10,000$ today or $1$ percent of the move's profits. There are two

decisions the studio will have to make. The first is to declde if the script is good or bad;

the second is to decide If the move is good or bad. First, there is a $85$ percent chance

that the script is bad. If it is bad, the studio does nothing more and throws the script out.

If the scrlpt is good, It will shoot the movle. After the movle is shot, the studio will revlew

It$,$ and there is a $55$ percent chance that the movle is bad. If the movle is bad, the movle

will not be promoted and will not turn a profit. If the movle is good, the studio will

promote heavlly: the average profit for this type of move is $$14\mathrm{.}6$ million. Carl rejects the

$$10,000$ and says he wants the $1$ percent of profits. What is value of accepting $1$ percent

of the profits? $($Do not round intermedlate calculatlons and round your answer to the

nearest whole number, e$.$g$..32)$

Payment to screenwriter