...Arundel Partners Case Analysis Executive Summary: A group of investors (Arundel group) is looking into the idea of purchasing the sequel rights associated with films produced by one or more major movie studios. Movie rights are to be purchased prior to films being made. Arundel wants to come up with a decision to either purchase all the sequel rights for a studio's entire production during a specified period of time or purchase a specified number of major films. Arundel's profitability is dependent upon the price it pays for a portfolio of sequel rights. Our analysis of Arundel's proposal includes a net present value calculation of each movie production company. In order to decide whether Arundel can make money buying movie sequel rights depends on whether the net present value of the production company's movies is higher than the estimated 2M per film required to purchase the rights. Problem Identification: How are the principals of Arundel Partners planning to make money by buying rights to sequels? They would be interested in purchasing the sequel rights for one or more studios¡¦ entire production over an extended period of not less than a year. If a particular film was a hit, and Arundel thought a sequel would be profitable, it would exercise its rights by producing the sequel. Alternatively, they can sell the rights to the highest bidder. Inevitably, the performance of the original films would not justify sequels, and for them the sequel rights would simply not...
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...solutions to arundel partners case http://www.justanswer.com/law/0vnrc-solutions-arundel-partners-case.html Executive Summary: A group of investors (Arundel group) is looking into the idea of purchasing the sequel rights associated with films produced by one or more major movie studios. Movie rights are to be purchased prior to films being made. Arundel wants to come up with a decision to either purchase all the sequel rights for a studio's entire production during a specified period of time or purchase a specified number of major films. Arundel's profitability is dependent upon the price it pays for a portfolio of sequel rights. Our analysis of Arundel's proposal includes a net present value calculation of each movie production company. In order to decide whether Arundel can make money buying movie sequel rights depends on whether the net present value of the production company's movies is higher than the estimated 2M per film required to purchase the rights. Problem Identification: How are the principals of Arundel Partners planning to make money by buying rights to sequels? They would be interested in purchasing the sequel rights for one or more studios¡¦ entire production over an extended period of not less than a year. If a particular film was a hit, and Arundel thought a sequel would be profitable, it would exercise its rights by producing the sequel. Alternatively, they can sell the rights to the highest bidder. Inevitably, the performance of the original...
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...DUISENBERG SCHOOL OF FINANCE MSc FINANCE Corporate Finance and Banking Arundel Partners: The Sequel Project The East Wind Amol Marathe 140843 Linglan Tan 140838 Xiangyu Zhou 140912 Date: 20/11/2014 Arundel Partners: The Sequel Project The East Wind Executive Summary: Arundel group is looking into the project of purchasing the sequel rights associated with films produced by one or more major movie studios in United States. Arundel believes that they can calculate a value for the rights to produce these sequels and take a position by investing in a portfolio conformed of these rights. Arundel Partners plans to make money by negotiating an option price below its net present value calculation and obtaining its expected returns on the option. The proposal is appealing to studios because sales of sequel rights can help them finance initial production, If particular movie becomes a sequel then the value of the option will increase and Arundel will either exercise the right to make the sequel or sell the right either to the original studio or a third party willing to take on the project. The principals at Arundel Partners are inclined to buy a portfolio of all these sequel rights rather than individual films given that Arundel wants to avoid buying the rights of movies that are not expected to perform well. Movie rights are supposed to be purchased prior to films being made. Arundel wants to come up with a decision to either purchase all the sequel rights for a studio's...
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...Case Analysis - Arundel Partners Executive Summary: A group of investors (Arundel group) is looking into the idea of purchasing the sequel rights associated with films produced by one or more major movie studios. Movie rights are to be purchased prior to films being made. Arundel wants to come up with a decision to either purchase all the sequel rights for a studio’s entire production during a specified period of time or purchase a specified number of major films. Arundel's profitability is dependent upon the price it pays for a portfolio of sequel rights. Our analysis of Arundel’s proposal includes a net present value calculation of each movie production company. In order to decide whether Arundel can make money buying movie sequel rights depends on whether the net present value of the production company’s movies is higher than the estimated 2M per film required to purchase the rights. Problem Identification: How are the principals of Arundel Partners planning to make money by buying rights to sequels? They would be interested in purchasing the sequel rights for one or more studios¡¦ entire production over an extended period of not less than a year. If a particular film was a hit, and Arundel thought a sequel would be profitable, it would exercise its rights by producing the sequel. Alternatively, they can sell the rights to the highest bidder. Inevitably, the performance of the original films would not justify sequels, and for them the sequel rights would simply not be exercised...
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...1) a) Why do the principals of Arundel Partners think they can make money buying movie sequel rights? The principle point is that they want to buy the rights of movies that can become, if successful sequels. When successful they can choose to produce the movie by themselves or to sell to the highest bidder (other production companies). When the first movie is successful the initial investment for the right is easily covered by the potential benefit of the (potential) sequels. As explained in the case, Arundel will notice the success or failure of a movie investment after the first few weeks of exhibition. b) Why do the partners want to buy a portfolio of rights in advance rather than negotiating film-by-film to buy them? Arundel want to buy a portfolio of right in advance rather than negotiating film-by-film because before production nobody has enough information about the potential of the movie. When the production has started, the movie studios have more information than Arundel. Then, they (movie studios) can already see the potential of a sequel or not. This is an example of asymmetry of information that could have implication on the bargaining power of Arundel. In addition, by buying a broad portfolio of sequel rights Arundel diversifies its risks (more than 30 investments could eliminate the specific risk). Moreover by buying purchasing a broad portfolio of sequel rights, Arundel is increasing its probability of having a highly successful investment...
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...Suggested Format for Case Analyses: 1. Executive Summary: brief 1 paragraph stating key problem(s) and your main recommendation(s)/decision(s). 2. Problem Identification: 1-2 page write-up of the key problem(s) you have identified within the case. This should not be a re-hash of the case itself. The Case Study questions should help you address the issues in this section. 3. Action Plan: 1-2 page write-up of your proposed solution to the problem(s) with detailed steps as to how to proceed with implementing your proposal. 4. Financial Analysis: 1-2 page write-up of the financial analysis that supports the recommendation(s) you have presented in the Executive Summary and Action Plan. Use an electronic spreadsheet to do the calculations and print out these figures as an attachment to your case analysis. Case Study Questions: Tiffany & Co.—1993: Should Tiffany actively manage its yen-dollar exchange rate risk? Why or why not? If Tiffany were to manage its exchange rate risk activity, then what should be the objectives of such a program (e.g., what specific purpose or theoretical rationale can justify a decision to hedge the yen-dollar risk)? Assuming Tiffany wanted to hedge this risk, try to identify what exposures should be managed via such a hedging program (e.g., hedge sales, net income, cash flow, etc.). Also, try to quantify how much of these exposures should be covered and for how long. Identify, in terms of cost, benefits, and risk, the relative...
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...Case 5: Arundel Partners Prepare a memo addressing the following questions: 1. Explain why Arundel Partners is interested in purchasing the rights to make sequels of all of the studios movies, rather than just some. Why do they believe this venture is profitable? 2. Suppose that you are a movie executive. You are considering a movie version of the life of President Garfield in the months leading up to his assassination by Charles Guiteau in a Washington DC railroad station in 1881. Your analysts have determined that the expected revenues are $94,556,250. They determine that revenues will be distributed binomially as shown in Exhibit 1 (40% annual volatility). Exhibit 1 shows the possible payoffs and the probability of each state occurring (note this information is provided in an Excel file). Assume that the one-year T-Bill rate is 5% (yield with semiannual compounding). If given the green light, the movie will have the following costs: a. $36MM – Negative Costs (assume it is incurred immediately) b. $25MM – Distribution Fees (assume these are paid in one year) c. $32MM – Distribution Expenses (assume these are paid in one year). Should you accept this project? Why? Suppose that Arundel Partners will give you a $2MM check for the rights to the sequel. Do you accept the project? 3. Suppose you come upon another project with exactly the same costs and possible payoffs. However, this film is a movie version of the popular 1960s television show Gilligan’s Island...
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... Read and study CH 17 from McDonald: “Real Options” 3. Read and study CH33 from Hull: “Real Options” 4. Case: Arundel Partners: The Sequel Project Answer the following questions: a. What makes Arundel think it can make money by buying a package of sequel rights? Is the profit opportunity, if it exists, likely to be sustainable? Arundel can make money selling the rights to a higher bid. Another option to make money is by producing the sequel exercising its rights but this will depend on if the net present value of the production movies is higher than the amount of buying the rights. If the future positive cashflows are undervalued Arundel can seek an arbitrage opportunity and buy the rights at the market price. b. Why would the studios be interested in raising money in this fashion? Why not raise the money in more traditional ways? The studio can not raise money in a traditional way because they don´t know when the movie will be popular o not so they don’t have regular cashflows. They also think that the business of movies production can be profitable by selling sequel rights ( this can be perform as an option). If a movie performs with positive cashflows they can invest in the movie production and have profits. The risk here is lower because they don´t have the same risk than the traditional ways of raise money like an asset. c. Why should Arundel pay anything for the sequel rights? The average movie loses money, and a sequel is more costly and has less...
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...Arundel Partners – The Sequels Project After evaluation of the proposed acquisition of the movie sequel rights, we recommend to offer movie studios as a per-movie price to purchase the sequel rights for their entire portfolio of movies the studios are going to produce over the next year. Arundel should make an offer to buy sequel rights as the average NPV (on a per film basis ) is $5.51 mn (this is the value calculated using real options method). Hence, we should pay a price below $5.51mn. As per informal inquiries made by us, the studios would be tempted to accept the price of $2mn or more and would not even consider a price below $1mn. We propose that we should negotiate for the price of $2mn. This would give us a profit of $3.51 mn per film. The movie studio might (or might not) be willing to sell these rights at this price because it helps the studios mitigate the risk associated with producing the sequel. Also, the fact that there is no liquid market for rights to produce sequels will also drive the price lower on account of lack of demand. Average value of Sequel rights per film using DCF Analysis Average value of sequel rights per film across all studios 1. There are 99 films in the portfolio. Arundel Partners will only produce films for which hypothetical NPV is greater than zero. Hence, we calculate NPV of each film at Year 0. Since the exhibits state that the values are already preset values, we have not rediscounted them. NPV (At year 0)...
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...Harvard Business School 9-292-140 op y June 12, 1992 Arundel Partners: The Sequel Project tC In April 1992 Mr. David A. Davis, a movie industry analyst at Paul Kagan Associates, Inc. in Los Angeles, was asked to look at and comment on an unusual business idea. The idea was to create an investment group, Arundel Partners, which would purchase the sequel rights associated with films produced by one or more major U.S. movie studios. As owner of the rights, Arundel would wait to see if a movie was successful, and then decide whether or not to produce a second film based on the story or characters of the first. The proposal was innovative in several respects. First, Arundel would purchase sequel rights before the first films were even made, let alone released. Second, the investor group would not make artistic judgments or attempt to select the rights for particular movies based on predictions of a possible sequel’s success. Instead, Arundel would contract to purchase all the sequel rights for a studio’s entire production during a specified period (one to two years), or alternatively, for a specified number of major films (15 to 30). Third, Arundel’s advance cash payments for the rights, at an agreed-upon price per film, would help finance production of the initial films. No The idea was intended to capitalize on a few specific characteristics of the movie industry. Producing and distributing motion pictures was a risky business and predicting the...
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...Suggested Format for Case Analyses: 1. Executive Summary: brief 1 paragraph stating key problem(s) and your main recommendation(s)/decision(s). 2. Problem Identification: 1-2 page write-up of the key problem(s) you have identified within the case. This should not be a re-hash of the case itself. The Case Study questions should help you address the issues in this section. 3. Action Plan: 1-2 page write-up of your proposed solution to the problem(s) with detailed steps as to how to proceed with implementing your proposal. 4. Financial Analysis: 1-2 page write-up of the financial analysis that supports the recommendation(s) you have presented in the Executive Summary and Action Plan. Use an electronic spreadsheet to do the calculations and print out these figures as an attachment to your case analysis. Case Study Questions: Tiffany & Co.—1993: 1. Should Tiffany actively manage its yen-dollar exchange rate risk? Why or why not? 2. If Tiffany were to manage its exchange rate risk activity, then what should be the objectives of such a program (e.g., what specific purpose or theoretical rationale can justify a decision to hedge the yen-dollar risk)? 3. Assuming Tiffany wanted to hedge this risk, try to identify what exposures should be managed via such a hedging program (e.g., hedge sales, net income, cash flow, etc.). Also, try to quantify how much of these exposures should be covered and for how long. 4. Identify, in terms of cost, benefits...
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...Arundel Partners Diageo plc Main focus of the case is to recommend a capital structure policy for the organization and develop a tradeoff between tax benefits of higher debts and cost of financial distress. Case provides details about the business model comprising of four divisions and history of the company. It also says firm is planning to divest noncore operations and consolidate the core business of beverage alcohol to reduce expense and increase synergy. Most Importantly, Case includes the key elements of business model and capital structure that have the potential of impacting financial strategy in following ways:- High Interest Coverage and Future Strategy As per the case, Diageo has interest coverage of 5x which is higher than interest coverage value of 4.2x, at which total of taxes paid and distress costs is the least as shown in Diageo’s Monte-Carlo simulation (shown below). Also, in the below simulation, its interest coverage ration should lie in the range of 5x to 3.6x to have optimal coverage. Diageo future strategy is based on organic and inorganic expansion. Under inorganic growth scenario, Diageo needs $6 to $8 billion to acquire other players in the market. To finance these acquisitions, Diageo would raise additional debt from the market. To make this strategy effective, Diageo has to keep very low cost of borrowing, which can only be achieved by keeping high interest coverage ratio and credit rating in the investment grade range. This explains the Diageo’s strategy...
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...Case Studies Solutions Case Studies Solutions,Article Writing,Assignments,Research Work,Home Work MenuSkip to content Home How We Work ? Refund Policy How to Order ? Disclaimer Contact Us Finance Cases List POSTED ON MARCH 8, 2013 Hello, If u want us to solve any case study from below list, do contact us anytime, We are here to provide the experience, expertise, and professionalism that you are looking for , Our tutors are available 24/7 to assist you what you need, Click Here to submit your Order. ======================================================================================= Acquisition of Consolidated Rail Corp. by Benjamin C. Esty Airbus A3XX: Developing the World’s Largest Commercial Jet by Benjamin C. Esty American Chemical Corp.by William E. Fruhan, John P. Goldsberry American Home Products Corp.by David W. Mullins AQR’s Momentum Funds by Daniel B. Bergstresser, Lauren H. Cohen, Randolph B. Cohen, Christopher Malloy Arundel Partners: The Sequel Project by Timothy A. Luehrman AXA MONY by Andre F. Perold, Lucy White Beta Management Co. by Michael E. Edleson Butler Lumber Co. by Thomas R. Piper Cartwright Lumber Co.by Thomas R. Piper Citigroup 2007: Financial Reporting and Regulatory Capital by Edward J. Riedl, Suraj Srinivasan Clarkson Lumber Co. by Thomas R. Piper Cooper Industries, Inc. by Thomas R. Piper Cost of Capital at Ameritrade by Erik Stafford, Mark L. Mitchell Debt Policy at UST, Inc. by Mark L. Mitchell Dell’s Working Capital...
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...A Literature Review on Absorptive Capacity Abstract This paper reviews the developed body of literature on absorptive capacity over the last two decades. It identifies and discusses the main research streams and argues the tensions in the literature originate from the use of expense in R&D as a means of developing AC. Following from that, and building on the recent developments in literature, I argue that research in this area are needed and that the focus of research has to be aligned again to the Cohen and Levinthal’s 1989 and 1990 papers that discuss the general commercial application of acquired knowledge. This study, therefore, contributes to the understanding of absorptive capacity's antecedents and outcomes by offering important recommendations for policy makers and firms’ management. Introduction Nowadays, internal research and development (R&D) are integrated with knowledge sources external to the firm through licensing, company acquisition, R&D outsourcing, or the hiring of qualified researchers with relevant knowledge. This simultaneous internal and external knowledge acquisition activities prompt that these two activities are complementary. This recall the notion of “absorptive capacity”. The motivation on choose the topic of absorptive capacity (AC) is due to the large use of it by researchers to explain various organizational phenomena. In addition, according to the focus of the course on developing and emerging economies, AC can act as a valuable complement...
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...John Wiley & Sons, Inc. David L. Kurtz University of Arkansas Louis E. Boone University of South Alabama BUSINESS 14TH EDITION Contemporary . . . at the speed of business “The 14th edition of Contemporary Business is dedicated to Joseph S. Heider, who brought me to John Wiley & Sons. Thank you, Joe.” —Dave Vice President & Executive Publisher Acquisitions Editor Assistant Editor Production Manager Senior Production Editor Marketing Manager Creative Director Senior Designer Text Designer Cover Designer Production Management Services Senior Illustration Editor Photo Editor Photo Researcher Senior Editorial Assistant Executive Media Editor Media Editor George Hoffman Franny Kelly Maria Guarascio Dorothy Sinclair Valerie A. Vargas Karolina Zarychta Harry Nolan Madelyn Lesure 4 Design Group Wendy Lai Elm Street Publishing Services Anna Melhorn Hilary Newman Teri Stratford Emily McGee Allison Morris Elena Santa Maria This book was set in Janson TextLTStd-Roman 10/13 by MPS Limited, a Macmillan Company, Chennai, India and printed and bound by R. R. Donnelley & Sons. The cover was printed by R. R. Donnelley & Sons. This book is printed on acid free paper. ∞ Founded in 1807, John Wiley & Sons, Inc. has been a valued source of knowledge and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations. Our company is built on a foundation of principles that include responsibility to the communities we serve and where we live...
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