Kim Bassingers Final Analysis Case Study Example | Topics and Well Written Essays - 750 words

Kim Bassingers Final Analysis - Case Study Example It must be noted here that the operative word on the $3 million revenue is ‘potential’; hence the amount is the estimated revenue from making the film with Kim Bassinger thus it is relevant to the case. It is relevant because it is an estimate given that Ms. Bassinger had â€Å"committed to do the project† (Barton, Shenkir & Marinas 163). Considering that the $800,000 foreign pre-sales are only probable, which means in accounting term has a less than 50 per cent probability of happening, hence in determining whether the maximum and minimum lost profit estimates of Main Line be adjusted this amount is irrelevant. The appearance of Ms. Bassinger in the film will not make the possibility of having $800,000 in foreign pre-sales more than probable. The realized loss of $2.1 million from producing â€Å"Boxing Helena† without Ms. Bassinger is a relevant cost to the case. This amount is the difference between making the movie with Ms. Fern and with Ms. Bassinger. Hence, it should be included in the maximum and minimum lost profit estimates of Main Line. The given figures for this lost profit estimates should not be adjusted since they have taken into account the $2.1 million loss. Requirement #2a Kim Bassinger's Final Analysis salary of $3 million is relevant to the determination of lost profits to Main Line. Although "Basinger was to be paid $600,000 in guaranteed compensation to appear in "Boxing Helena" with another $400,000 to be paid out of producer revenues "before the bank" was paid on the production loan to finance the film" (Barton, Shenkir & Marinas 164); it is highly probable that her agent would have negotiated a higher salary for the film. Requirement #2b The comparison of revenues for Bassinger films with revenues for Fenn films is relevant to the determination of lost profits to Main Line. The comparison is like that of the incremental revenue comparison done in a make or buy decision. Option 1 here or we can say the make decision is the film starring Ms. Bassinger, while Option 2 or if you like the buy decision is hiring Ms. Fenn to do it instead. Requirement #3 In my opinion, Main Line's expert witness is not correct in attempting to estimate the revenues for "Boxing Helena" beyond pre-sales amounts. In an investment decision, the revenues through out the life of that investment should always be included in determining whether that investment is profitable. In this case, the revenues beyond the pre-sales amounts can be reasonably estimated. Requirement #4 Yes, Main Line's lost profits should be adjusted downward to include an estimate of domestic revenues for the "Without Basinger" film. Hence, only the incremental revenue had Ms. Bassinger appeared in the film should be included in the lost profit estimates. However, the use of the $1.7 million advance made by one of the Main Line partners against domestic revenues as the estimate is not a valid estimate for the domestic revenues for the "Withour Bassinger" film. A good estimate would be the average revenue of Fenn films which is $1.6 million. Requirement #5 It is not reasonable to assume that Main Line's pretax cash position would have increased by $3 million. Part of this amount would be paid to others such as the partner who advances $1.7 million. Moreover, it can be that several of the expenses incurred by the film production have been taken up as liabilities; hence the initial take up from the film will be used to pay up some of these liabilities. Requirement #6 I disagree with the jury's lost profit assessment of $7,421,694. My own assessment based on what is relevant and irrelevant cost figures to the case is $3,000,000 which is the average of the minimum and maximum lost profit figures as presented in