Essay on Solutions to Arundel Partners Case
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 …show more content…
What are primary advantages and disadvantages of the approach that was taken by us in valuing the sequel rights? Our analysis of Arundel's proposal includes a net present value calculation of each movie production company. Arundel feels that waiting to purchase sequel rights until after the movie goes into production will make it more difficult and costly to purchase the rights. Below are advantages and disadvantages of our approach.
- Because all available data was used, there is a greater sample in our analysis. We assume that more data points will lead to a more accurate conclusion.
- We did not eliminate any outliers because we felt outliers are characteristic of the industry.
- The analysis is based upon historical data rather than fabricated assumptions.
- We believe that breaking out the data by studio is an advantage because it provides direction.
- It is assumed that historical performance is indicative of future performance in the short term based on historical data.