Gus Van Sant VS. Johny Depp: Financial Case Study

Docs en anglais | 18 pages | 30-09-2008 | Format : | Note : Non noté |

PRIX : 9.00€ |

Résumé

In this case study, we are the CFO of a major US film studio (in the analysis, we will call it "US film studio"). Our aim is to make a choice between two different alternatives in order to determine which of the two different projects for "Cloudburst" film is the best one, either choosing the potential scenario 1: Continue making the film with Van Sant as the director, or the potential scenario 2: Continue making the film with Depp as the lead actor.

Table of contents:

I) You have wisely decided to use NPV to make your determination. Discuss all the costs that should be included as your initial cash outflow for each scenario. Explain why each should and should not be included in your analysis.

II) Calculate the NPV for each scenario and explain the process.

III) What is another important scenario that should be considered and what is it worth today?

IV) You are considering including part of the costs of the studio's finance department as a cost of these films. This includes the costs of both the employees and the overhead they use (rent, electricity, phone, etc.). Should these costs be included in the analysis? Why or why not? Are there some occasions when they should be included and others when they should not? Explain.

V) The head of Marketing for the studio believes that keeping Depp is the best choice since Payback is much shorter. The Van Sant film, meanwhile is expected to have a longer life because of its potential cult following. Explain in general why this Payback method is not the best to use.

VI) The studio that you work for is only one part of a much larger corporation. The larger corporation also has theme parks, a music division, and a publishing unit. Describe how this might affect your financial evaluation of the projects.

VII) Revenues from the US movie business ha ve become less predictable in recent years. Rising anti-Americanism and declining cinema and DVD sales, combined with rising production budgets and actors' salaries, have made industry profits less than ever. If you believe that the industry is riskier, where should that be reflected mathematically in your NPV calculations. Explain why.

VIII) The head of the studio in our case reports to the CEO of the corporation. The boss of the CEO are the shareholders. Describe why this is the case and explain how they supervise him. Describe also the incentives he ha s for acting in their interests, and not just his own.

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