Global studios are thinking of producing a mega film

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Reference no: EM138916

Q. Global studios are thinking of producing a mega film, Aqua world, which could be a mega hit or a mega flop. Profit is uncertain for two reasons:

(1) The cost of producing the film may be low or high, and

(2) The market reception for the film may be strong or weak. There is a .5 chance of low costs (C) and a .5 chance of high costs. The probability of strong demand (D) is .4; the probability of weak demand is .6. The studios profits (in millions of dollars) for the four possible outcomes are shown in the table.

low C/strong D = 80
low C/weak D = 10
high C/strong D = 0
high C/weak D = -70

Should the studio produce the film?

Reference no: EM138916

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