The Head of Operations for a Movie Studio Wants to Determine

question 47

Multiple Choice

The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production.She feels that script #1 has a 70% chance of earning $100 million over the long run,but a 30% chance of losing $20 million.If this movie is successful,then a sequel could also be produced,with an 80% chance of earning $50 million,but a 20% chance of losing $10 million.On the other hand,she feels that script #2 has a 60 % chance of earning $120 million,but a 40% chance of losing $30 million.If successful,its sequel would have a 50% chance of earning $80 million and a 50% chance of losing $40 million.As with the first script,if the original movie is a "flop",then no sequel would be produced.
-What would be the total payoff is script #1 were a success,but its sequel were not?

• A)$150 million
• B)$100 million
• C)$90 million
• D)$50 million
• E)$-10 million

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Definitions:

Annual Income

Annual income is the total sum of money earned by an individual or entity over the course of a year from all sources including wages, dividends, and bonuses.

Level of Education

The highest degree or level of schooling an individual has completed, often categorized by primary, secondary, tertiary, and further education.

ANOVA Table

A tabular representation used in analysis of variance that summarizes the source of variation, degrees of freedom, sum of squares, mean squares, and the F-statistic.

F-ratio

A statistical measure used in the analysis of variance (ANOVA) to determine the ratio of variance between groups to the variance within groups.