Nagornov_Arundel_case (4)

Nagornov_Arundel_case(4)

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Unformatted text preview: value of cash inflows is higher than USD 27,7 mln (mean of the sample) If a sequel is produced, it is expected to generate 70% the revenues of the original film. The negative cost of a sequel is expected to be 120% of the negative cost of original film Discount rate: 12% (Standard & Poor’s average for How much are the sequel rights worth in 1989? How much are the sequel rights worth in 1989? Calculations Maximum price of the option should be such that Arundel generates 0 gain. Estimated price of an option – maximum USD 3,6 mln How much are the sequel rights worth in 1989? How much are the sequel rights worth in 1989? Sensitivity Analysis Application of Black­ Scholes Model Application of Black­ Scholes Model • Call price C = SN ( d1 ) − Ke − rT N ( d 2 ) S ln K d1 = + 0.5σ T σT • d 2 = d1 − σ T Parameters – S = current value of underlying = expected Revenue of a Sequel discounted to t=0 – K = strike price = expected Cost of a Sequel (which has to be covered by revenue) – T = time-to-maturity (in Periods) σ = standard d...
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This document was uploaded on 11/11/2013.

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