Aundel

Assignment: Arundel Partners

You should prepare the Arundel Partners case for class discussion. I will ask several members of the class to present their analyses of the case issues, and we will discuss the pros and cons of each approach. In particular, one might think of analyzing this case using the real options perspective, and/or one might think of analyzing this case using the traditional analysis perspective (DPL, @Risk, etc.). Choose one or both of these ways of thinking about the problem as a basis for your analysis. Be prepared to comment on the basis for your choice, and the issue of which choice might be preferred.

In carrying out your analysis, consider the following questions:

1. Why do the principals of Arundel Partners think they can make money buying movie sequel rights? Why do the partners want to buy a portfolio of rights in advance rather than negotiating film-by-film to buy them?

2. Estimate the per-film value of a portfolio of sequel rights such as Arundel proposes to buy. [There are several ways to approach this problem, all of which require some part of the data set in Exhibits 6-9. You may find it helpful to consult the Appendix, which explains how these exhibits were prepared.]

3. What are the primary advantages and disadvantages of the approach you took to valuing the rights? What further assistance or data would you require to refine your estimate of the rights’ value?

4. What problems or disagreements would you expect Arundel and a major studio to encounter in the course of a relationship like that described in the case? What contractual terms and provisions should Arundel insist on?