A Concert Promoter Assesses That the Probability of a Concert

question 48

Multiple Choice

A concert promoter assesses that the probability of a concert being a success is 0.4. The initial cash cost to take out an option to organise the concert will be £50,000. A success will create a present value of all cash flows of £250,000 and a flop will lose £100,000. The promoter can make a final decision at a later date before making any further payments. What is the expected NPV, using an options approach?

• A) £50,000
• B) £14,000
• C) £10,000
• D) - £10,000

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Definitions:

Exculpatory Clause

A part of a contractual agreement that releases one party from liability for any wrongdoings towards the other.

Liability Waiver

A document in which one party agrees to relinquish the right to pursue legal action against another party for potential losses or damages.

Substantive Unconscionability

A legal principle that allows courts to refuse to enforce contracts or clauses that are excessively unfair or one-sided.

Bargaining Power

Refers to the ability of one party in a negotiation to influence the terms and conditions in their favor.