The Head of Operations for a Movie Studio Wants to Determine

question 8

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 is the expected payoff for the optimum decision alternative?

• A) $150 million
• B) $90.6 million
• C) $84 million
• D) $72 million
• E) $60 million

---

Definitions:

Nasogastric Tube

A flexible tube that is passed through the nose into the stomach, primarily used for feeding or removing stomach contents.

Intermittent Suctioning

A medical procedure that involves the periodic application of suction to remove bodily fluids or secretions, used in respiratory care.

Abdominal Surgery

Surgical procedures performed on organs within the abdominal cavity, like the appendix, liver, pancreas, or intestines, for various medical reasons.

Respiratory Syncytial Virus (RSV)

A common respiratory virus that usually causes mild, cold-like symptoms but can be serious in infants and older adults.