# High Places Studio a Solution

Topics: Film, DIRECT Pages: 10 (1019 words) Published: May 14, 2012
HIGH PLACES STUDIO (A)
Reputation damage not considered Cumm HBO Profit \$ '000,000 Probability ≤x 0 0% 3 100% Movie Profit \$ '000,000 0 Cumm Probability ≤x % 0

-\$30m E
0.4 Not on Schedule

Associated Probability
Stop Production

(A) 0.75*\$60m = -\$45m

28%

Continue Production

(B) \$30m - \$60m = -\$30m

28%

\$3.9m B
0.3 Disappointment 0.7 Morgan Directs

(C) \$35m -\$60m = -\$25m

13% -30 28

\$3.48m D
Produce Movie

\$26.5m A
0.6 On Schedule

0.2 Blockbuster

(D) \$180m-\$60m = \$120m

8% -25 41

0.5 Hit

(E) \$80m-\$60m = \$20m

21% -5 15% 10 15% 71 56

\$2.5m C
0.3 McManus Directs

0.5 Hit

(F) \$45m-\$35m = \$10m

0.5 Modest Disappointment

(G) \$30m-\$35m = -\$5m

20

92

120
HBO Box Office

100

100%

(H) \$3m

(A) EMV Calculations: EMVa = (-\$25*0.3)+(\$120*0.2)+(\$20*0.5) = \$26.5m EMVb = (-\$30*0.4)+ (\$26.5*0.6) = \$3.9m EMVc = (\$10*0.5) + (-\$5*0.5) = \$2.5m EMVd = (\$3.9*0.7) + (\$2.5*0.3) = \$3.48m Based on the EMV calculations, High Places Studio should go ahead and produce the movie in order to maximize profit not considering risking company reputation

Information on whether Morgan will accept to direct the Tuna on Rye -\$30m E Stop Production 0.4 Not on Schedule Continue Production

(A) 0.75*\$60m = -\$45m

(B) \$30m - \$60m = -\$30m

\$3.9m B
Information says Morgan will direct

0.3 Disappointment

(C) \$35m -\$60m = -\$25m

0.7

\$3.63m D
With Information

\$26.5m A
0.6 On Schedule

0.2 Blockbuster

(D) \$180m-\$60m = \$120m

0.5 Hit

\$2.5m C
0.3
Information says Morgan will not direct

(E) \$80m-\$60m = \$20m (F) \$45m-\$35m = \$10m

0.5 Hit

\$3m F

McManus directs

0.5 Modest Disappointment

(G) \$30m-\$35m = -\$5m (H) \$3m

HBO

No Information

(I) \$3.48m

(d)(i) EMVd = (\$3.9*0.7) + (\$3*0.3) = \$3.63m EMV with information on whether Morgan will accept to direct the Tuna on Rye =\$3.63m EMV without information on whether Morgan will accept to direct the movie =\$3.48m Cost of perfect information =\$150,000.00 Conclusion Laura may seek information on whether Morgan will be available to direct the Tuna on Rye movie However, if information says he will not be available, Laura should go or the HBO box office option

Information on whether Morgan will complete film on time

0.3 Disappointment

(C) \$35m -\$60m = -\$25m

\$26.5m A
Information says Morgan will complete film on time

0.2 Blockbuster

(D) \$180m-\$60m = \$120m

0.6

\$17.1m D
With Information

0.5 Hit

(E) \$80m-\$60m = \$20m

\$2.5m C
0.4
Information says Morgan will not complete film on time

0.5 Hit

\$3m F

McManus directs

(F) \$45m-\$35m = \$10m

0.5 Modest Disappointment

(G) \$30m-\$35m = -\$5m (H) \$3m

HBO

No Information

(I) \$3.48m

(d)(ii) EMVd = (\$26.5*0.6) + (\$3*0.4) = \$17.1m EMV with information whether Morgan will complete film on time = \$17.1m EMV with no information on whether Morgan will complete film =\$3.48 Cost of perfect information, EVPI = \$13,620,000.00

Information on whether Morgan will accept to direct and will complete film on time

0.3 Disappointment

(A) \$35m -\$60m = -\$25m

\$26.5m A
Information says Morgan will direct and complete film and on time

0.2 Blockbuster

(B) \$180m-\$60m = \$120m

0.42

\$12.87m D
With Information

0.5 Hit

0.28 will direct but not complete
film on time

\$3m Information says Morgan B

McManus directs

\$2.5m C

(C) \$80m-\$60m = \$20m (D) \$45m-\$35m = \$10m

0.5 Hit

0.5 Modest Disappointment

(E) \$30m-\$35m = -\$5m (F) \$3m

HBO

0.3

Information says Morgan will not direct Tuna on Rye

\$3m F

\$2.5m E
McManus directs

0.5 Hit

(G) \$45m-\$35m = \$10m

0.5 Modest Disappointment

(H) \$30m-\$35m = -\$5m (I) \$3m (J) \$3.48m

HBO No Information

(d)(iii) EMVd = (\$26.5*0.42)+(\$3*0.28)+(\$3*0.3) = \$12.87m EMV with information whether Morgan will accept to direct and complete film on time = \$12.87m EMV with no information on whether Morgan will accept to direct and...