arundel partners - real options valuations

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Parameters Values Bino Avg. Hypothetical Net Inflow of Sequel ### 0 1 2 Avg Hypothetical Negative Cost of Sequel ### ### ### ### WACC (based on 6% semiannual discount rate) 12.36% $9.54 ### ### $6.73 0.083 σ 121% 1.418 1.418 D (down step in binomial tree) 0.705 7.03% 1.006 0.422 ### Binomia 0 1 2 $5.12 $8.73 ### $2.54 $4.56 $1.09 to Year 0) ∆T exp(σ√∆T) binomial tree) 1992) exp(r T) Lognormal model) to Year 2)

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Page 1: Arundel Partners - Real Options Valuations

Parameters Values Binomial Tree for Net Inflow of Sequel (using lognormal distribution)Avg. Hypothetical Net Inflow of Sequel $ 21.57 0 1Avg Hypothetical Negative Cost of Sequel $ 22.67 $ 13.53 $ 19.19 WACC (based on 6% semiannual discount rate) 12.36% $ 9.54 Avg. Hypothetical Net Inflow of Sequel (discounted to Year 0) $ 13.53

0.083σ 121%

1.418U (continuously compounded returns in up step in binomial tree) 1.418D (down step in binomial tree) 0.705risk-free rate (based on 10yr US Treasury rate in 1992) 7.03%

1.006q (risk-neutral probability of up move, using Lognormal model) 0.422Avg Hypothetical Negative Cost of Sequel (discounted to Year 2) $ 19.79

Binomial Tree for Per-Film Option Price (using Rick-Neutral Probabilities)0 1

$ 5.12 $ 8.73 $ 2.54

∆T

exp(σ√∆T)

exp(r∆T)

Page 2: Arundel Partners - Real Options Valuations

Binomial Tree for Net Inflow of Sequel (using lognormal distribution)2 3 4 5 6 7 8 9 10 11

$ 27.21 $ 38.59 $ 54.73 $ 77.61 $ 110.05 $ 156.06 $ 221.30 $ 313.82 $ 445.02 $ 631.07 $ 13.53 $ 19.19 $ 27.21 $ 38.59 $ 54.73 $ 77.61 $ 110.05 $ 156.06 $ 221.30 $ 313.82 $ 6.73 $ 9.54 $ 13.53 $ 19.19 $ 27.21 $ 38.59 $ 54.73 $ 77.61 $ 110.05 $ 156.06

$ 4.75 $ 6.73 $ 9.54 $ 13.53 $ 19.19 $ 27.21 $ 38.59 $ 54.73 $ 77.61 $ 3.35 $ 4.75 $ 6.73 $ 9.54 $ 13.53 $ 19.19 $ 27.21 $ 38.59

$ 2.36 $ 3.35 $ 4.75 $ 6.73 $ 9.54 $ 13.53 $ 19.19 $ 1.66 $ 2.36 $ 3.35 $ 4.75 $ 6.73 $ 9.54

$ 1.17 $ 1.66 $ 2.36 $ 3.35 $ 4.75 $ 0.83 $ 1.17 $ 1.66 $ 2.36

$ 0.58 $ 0.83 $ 1.17 $ 0.41 $ 0.58

$ 0.29

Binomial Tree for Per-Film Option Price (using Rick-Neutral Probabilities)2 3 4 5 6 7 8 9 10 11

$ 14.56 $ 23.79 $ 38.06 $ 59.54 $ 91.17 $ 136.84 $ 201.97 $ 294.38 $ 425.46 $ 611.40 $ 4.56 $ 7.97 $ 13.63 $ 22.77 $ 37.08 $ 58.78 $ 90.72 $ 136.61 $ 201.74 $ 294.15 $ 1.09 $ 2.12 $ 3.92 $ 7.10 $ 12.57 $ 21.63 $ 36.08 $ 58.16 $ 90.49 $ 136.38

$ 0.35 $ 0.83 $ 1.64 $ 3.19 $ 6.08 $ 11.30 $ 20.34 $ 35.17 $ 57.93 $ 0.24 $ 0.52 $ 1.11 $ 2.34 $ 4.83 $ 9.72 $ 18.92

$ 0.04 $ 0.10 $ 0.23 $ 0.55 $ 1.31 $ 3.11 $ - $ - $ - $ - $ -

$ - $ - $ - $ - $ - $ - $ -

$ - $ - $ -

Page 3: Arundel Partners - Real Options Valuations

Binomial Tree for Net Inflow of Sequel (using lognormal distribution)12

$ 894.90 $ 445.02 $ 221.30 $ 110.05 $ 54.73 $ 27.21 $ 13.53 $ 6.73 $ 3.35 $ 1.66 $ 0.83 $ 0.41 $ 0.20

Binomial Tree for Per-Film Option Price (using Rick-Neutral Probabilities)12

$ 875.11 $ 425.23 $ 201.51 $ 90.26 $ 34.94 $ 7.42 $ - $ - $ - $ - $ - $ -

Page 4: Arundel Partners - Real Options Valuations

Arundel PartnersExhibit 6 (amounts in millions of constant (1991) dollars)

First FilmRevenues Costs

Film Studio U.S. Theatre Other Dist. Fees1 Parenthood MCA Universal $ 55.0 $ 146.1 $ 53.6 2 Born on the Fourth of July MCA Universal $ 40.5 $ 110.9 $ 40.3 3 Field of Dreams MCA Universal $ 33.6 $ 94.1 $ 34.0 4 Uncle Buck MCA Universal $ 33.3 $ 93.6 $ 33.8 5 Sea of Love MCA Universal $ 31.5 $ 89.0 $ 32.1 6 Always MCA Universal $ 22.0 $ 66.1 $ 23.4 7 K-9 MCA Universal $ 20.5 $ 62.3 $ 22.0 8 The Burbs MCA Universal $ 19.0 $ 58.9 $ 20.7 9 The Dream Team MCA Universal $ 15.8 $ 51.1 $ 17.8 10 Do the Right Thing MCA Universal $ 14.6 $ 48.2 $ 16.7 11 Dad MCA Universal $ 11.9 $ 41.5 $ 14.2 12 Shocker MCA Universal $ 8.3 $ 32.7 $ 10.9 13 The Wizard MCA Universal $ 5.5 $ 26.1 $ 8.4 14 Renegades MCA Universal $ 4.6 $ 23.9 $ 7.6 15 Harlem Nights Paramount $ 36.3 $ 100.8 $ 36.5 16 Pet Sematary Paramount $ 29.1 $ 83.2 $ 29.9 17 Black Rain Paramount $ 27.5 $ 79.4 $ 28.5 18 Major League Paramount $ 23.7 $ 70.1 $ 25.0 19 Cousins Paramount $ 11.0 $ 39.4 $ 13.4 20 We're No Angels Paramount $ 5.5 $ 26.1 $ 8.4 21 Let it Ride Paramount $ 2.3 $ 18.3 $ 5.5 22 Shirley Valentine Paramount $ 2.3 $ 18.3 $ 5.5 23 Fat Man and Little Boy Paramount $ 1.5 $ 16.5 $ 4.8 24 The Experts Paramount $ - $ 12.7 $ 3.4 25 Look Who's Talking Sony $ 75.8 $ 196.5 $ 72.6 26 When Harry Met Sally Sony $ 46.1 $ 124.5 $ 45.4 27 Steel Magnolias Sony $ 44.0 $ 119.4 $ 43.5 28 See No Evil; Hear No Evil Sony $ 22.5 $ 87.1 $ 23.8 29 The Bear Sony $ 14.9 $ 48.7 $ 16.9 30 Glory Sony $ 14.3 $ 47.4 $ 16.4 31 Look Up Sony $ 8.8 $ 34.1 $ 11.4 32 Casualties of War Sony $ 8.1 $ 32.5 $ 10.8 33 Chances Are Sony $ 7.2 $ 30.1 $ 9.9 34 Family Business Sony $ 6.6 $ 28.7 $ 9.4 35 She's Out of Control Sony $ 5.7 $ 26.6 $ 8.6 36 Who's Harry Crumb? Sony $ 5.0 $ 24.7 $ 7.9 37 Adventures of Baron Munchause Sony $ 4.3 $ 23.1 $ 7.3 38 True Believer Sony $ 4.1 $ 22.6 $ 7.1 39 Troop Beverly Hills Sony $ 4.0 $ 22.3 $ 7.0 40 Tap Sony $ 3.9 $ 22.1 $ 6.9 41 Deepstar Six Sony $ 3.4 $ 21.0 $ 6.5 42 Johnny Handsome Sony $ 2.9 $ 19.7 $ 6.0 43 Music Box Sony $ 2.8 $ 19.4 $ 5.9 44 Immediate Family Sony $ 2.3 $ 18.3 $ 5.5 45 Listen to Me Sony $ 2.0 $ 17.5 $ 5.2 46 Physical Evidence Sony $ 1.7 $ 16.7 $ 4.9 47 Old Gringo Sony $ 1.5 $ 16.5 $ 4.8 48 Loverboy Sony $ 1.5 $ 16.5 $ 4.8 49 Sing Sony $ 1.0 $ 15.1 $ 4.3 50 Winter People Sony $ 0.8 $ 14.6 $ 4.1 51 Welcome Home Sony $ 0.4 $ 13.8 $ 3.8

Page 5: Arundel Partners - Real Options Valuations

52 Adventures of Milo and Otis Sony $ 0.1 $ 13.0 $ 3.5 53 The Big Picture Sony $ 0.1 $ 13.0 $ 3.5 54 Slaves of New York Sony $ 0.1 $ 13.0 $ 3.5 55 Eat a Bowl of Tea Sony $ 0.1 $ 13.0 $ 3.5 56 To Kill a Priest Sony $ - $ 12.7 $ 3.4 57 Me and Him Sony $ - $ 12.7 $ 3.4 58 Bloodhounds of Broadway Sony $ - $ 12.7 $ 3.4 59 The War of the Roses 20th Century Fox $ 45.6 $ 123.2 $ 44.9 60 The Abyss 21st Century Fox $ 31.6 $ 89.3 $ 32.2 61 Weekend at Bernie's 22nd Century Fox $ 15.4 $ 50.1 $ 17.4 62 Say Anything 23rd Century Fox $ 9.8 $ 36.5 $ 12.3 63 Skin Deep 24th Century Fox $ 9.4 $ 35.4 $ 11.9 64 The Fabulous Baker Boys 25th Century Fox $ 8.8 $ 34.1 $ 11.4 65 Millenium 26th Century Fox $ 2.6 $ 19.1 $ 5.8 66 Worth Winning 27th Century Fox $ 1.7 $ 16.7 $ 4.9 67 Gleaming the Cube 28th Century Fox $ 1.2 $ 15.7 $ 4.5 68 How I Got Into College 29th Century Fox $ 0.6 $ 14.1 $ 3.9 69 When the Whales Came 30th Century Fox $ - $ 12.7 $ 3.4 70 Batman Warner Bros $ 165.6 $ 414.2 $ 154.5 71 Driving Miss Daisy Warner Bros $ 55.6 $ 147.4 $ 54.1 72 Tango & Cash Warner Bros $ 33.1 $ 93.0 $ 33.6 73 Lean on Me Warner Bros $ 15.8 $ 51.5 $ 17.8 74 Her Alibi Warner Bros $ 10.1 $ 37.3 $ 12.6 75 Next of Kin Warner Bros $ 7.7 $ 31.4 $ 10.4 76 Pink Cadillac Warner Bros $ 7.5 $ 30.9 $ 10.2 77 Young Einstein Warner Bros $ 6.6 $ 28.7 $ 9.4 78 Dead-Bang Warner Bros $ 3.9 $ 22.1 $ 6.9 79 Dead Calm Warner Bros $ 3.6 $ 21.5 $ 6.7 80 Second Sight Warner Bros $ 2.8 $ 19.4 $ 5.9 81 See You in the Morning Warner Bros $ 2.4 $ 18.6 $ 5.6 82 In Country Warner Bros $ 1.8 $ 17.0 $ 5.0 83 Cookie Warner Bros $ 1.1 $ 15.4 $ 4.4 84 How to Get Ahead in Advertising Warner Bros $ 0.2 $ 13.3 $ 3.6 85 Powwow Highway Warner Bros $ 0.1 $ 13.0 $ 3.5 86 Bert Rigby, You're a Fool Warner Bros $ - $ 12.7 $ 3.4 87 Penn & Teller Get Killed Warner Bros $ - $ 12.7 $ 3.4 88 Checking Out Warner Bros $ - $ 12.7 $ 3.4 89 Honey, I Shrunk the Kids Walt Disney $ 80.0 $ 206.7 $ 76.4 90 Dead Poets Society Walt Disney $ 53.3 $ 141.8 $ 52.0 91 The Little Mermaid Walt Disney $ 44.2 $ 120.0 $ 43.7 92 Turner & Hooch Walt Disney $ 38.8 $ 106.9 $ 38.8 93 Three Fugitives Walt Disney $ 20.4 $ 62.1 $ 21.9 94 An Innocent Man Walt Disney $ 11.6 $ 40.7 $ 13.9 95 Blaze Walt Disney $ 9.9 $ 36.7 $ 12.4 96 New York Stories Walt Disney $ 5.2 $ 25.3 $ 8.1 97 Gross Anatomy Walt Disney $ 5.1 $ 25.0 $ 8.0 98 Disorganized Crime Walt Disney $ 4.4 $ 23.4 $ 7.4 99 Cheetah Walt Disney $ 4.4 $ 23.4 $ 7.4

All Film Average $ 14.9 $ 49.0 $ 17.0

Page 6: Arundel Partners - Real Options Valuations

Arundel PartnersExhibit 6 (amounts in millions of constant (1991) dollars)

First Film Hypothetical SequelCosts Revenues Costs

Dist. Exp. Negative U.S. Theatre Other Dist. Fees Dist. Exp. Negative $ 43.1 $ 22.0 $ 38.5 $ 106.1 $ 38.5 $ 32.6 $ 26.4 $ 33.1 $ 19.8 $ 28.3 $ 81.4 $ 29.2 $ 26.0 $ 23.8 $ 31.6 $ 17.6 $ 23.5 $ 69.7 $ 24.8 $ 22.9 $ 21.1 $ 30.2 $ 16.5 $ 23.3 $ 69.3 $ 24.7 $ 22.8 $ 19.8 $ 32.0 $ 27.5 $ 22.0 $ 66.1 $ 23.5 $ 22.0 $ 33.0 $ 28.0 $ 34.1 $ 15.4 $ 50.1 $ 17.4 $ 17.7 $ 40.9 $ 20.9 $ 13.2 $ 14.4 $ 47.5 $ 16.4 $ 17.0 $ 15.8 $ 22.9 $ 18.7 $ 13.3 $ 45.0 $ 15.5 $ 16.4 $ 22.4 $ 19.0 $ 16.5 $ 11.1 $ 39.6 $ 13.5 $ 14.9 $ 19.8 $ 14.6 $ 7.7 $ 10.2 $ 37.6 $ 12.7 $ 14.4 $ 9.2 $ 20.0 $ 20.9 $ 8.3 $ 32.9 $ 11.0 $ 13.1 $ 25.1 $ 14.6 $ 6.6 $ 5.8 $ 26.7 $ 8.6 $ 11.5 $ 7.9 $ 9.5 $ 8.8 $ 3.8 $ 22.1 $ 6.9 $ 10.3 $ 10.6 $ 7.6 $ 13.2 $ 3.2 $ 20.6 $ 6.3 $ 9.9 $ 15.8 $ 41.7 $ 33.0 $ 25.4 $ 74.4 $ 26.6 $ 24.1 $ 39.6 $ 27.1 $ 12.1 $ 20.4 $ 62.0 $ 21.9 $ 20.9 $ 14.5 $ 31.6 $ 33.0 $ 19.3 $ 59.4 $ 20.9 $ 20.2 $ 39.6 $ 26.1 $ 13.2 $ 16.6 $ 52.9 $ 18.5 $ 18.4 $ 15.8 $ 14.4 $ 14.3 $ 7.7 $ 31.4 $ 10.4 $ 12.8 $ 17.2 $ 19.9 $ 24.2 $ 3.8 $ 22.1 $ 6.9 $ 10.3 $ 29.0 $ 10.8 $ 19.8 $ 1.6 $ 16.7 $ 4.8 $ 8.8 $ 23.8 $ 5.6 $ 8.8 $ 1.6 $ 16.7 $ 4.8 $ 8.8 $ 10.6 $ 9.2 $ 20.9 $ 1.0 $ 15.3 $ 4.3 $ 8.5 $ 25.1 $ 0.8 $ 13.2 $ - $ 12.7 $ 3.4 $ 7.8 $ 15.8 $ 51.7 $ 11.0 $ 53.1 $ 141.4 $ 51.8 $ 41.9 $ 13.2 $ 38.1 $ 20.9 $ 32.3 $ 91.0 $ 32.8 $ 28.5 $ 25.1 $ 35.9 $ 24.2 $ 30.8 $ 87.4 $ 31.5 $ 27.6 $ 29.0 $ 23.1 $ 19.8 $ 15.7 $ 50.8 $ 17.7 $ 17.9 $ 23.8 $ 22.5 $ 23.1 $ 10.4 $ 37.9 $ 12.8 $ 14.5 $ 27.7 $ 14.5 $ 23.1 $ 10.0 $ 37.0 $ 12.5 $ 14.2 $ 27.7 $ 16.1 $ 18.7 $ 6.2 $ 27.7 $ 9.0 $ 11.8 $ 22.4 $ 17.1 $ 27.5 $ 5.7 $ 26.6 $ 8.6 $ 11.5 $ 33.0 $ 15.4 $ 19.8 $ 5.0 $ 24.9 $ 7.9 $ 11.0 $ 23.8 $ 16.5 $ 19.8 $ 4.6 $ 23.9 $ 7.6 $ 10.8 $ 23.8 $ 12.2 $ 16.5 $ 4.0 $ 22.4 $ 7.0 $ 10.4 $ 19.8 $ 13.2 $ 15.4 $ 3.5 $ 21.1 $ 6.5 $ 10.0 $ 18.5 $ 7.8 $ 57.1 $ 3.0 $ 20.0 $ 6.1 $ 9.7 $ 68.5 $ 12.8 $ 15.4 $ 2.9 $ 19.6 $ 6.0 $ 9.6 $ 18.5 $ 11.5 $ 19.8 $ 2.8 $ 19.5 $ 5.9 $ 9.6 $ 23.8 $ 11.4 $ 16.5 $ 2.7 $ 19.3 $ 5.8 $ 9.5 $ 19.8 $ 10.0 $ 8.8 $ 2.4 $ 18.5 $ 5.5 $ 9.3 $ 10.6 $ 9.7 $ 22.0 $ 2.0 $ 17.6 $ 5.2 $ 9.1 $ 26.4 $ 8.4 $ 19.8 $ 2.0 $ 17.4 $ 5.1 $ 9.0 $ 23.8 $ 12.1 $ 15.4 $ 1.6 $ 16.7 $ 4.8 $ 8.8 $ 18.5 $ 12.0 $ 16.5 $ 1.4 $ 16.1 $ 4.6 $ 8.7 $ 19.8 $ 9.2 $ 18.7 $ 1.2 $ 15.5 $ 4.4 $ 8.5 $ 22.4 $ 6.6 $ 37.3 $ 1.0 $ 13.3 $ 4.3 $ 8.5 $ 44.8 $ 10.5 $ 11.0 $ 1.0 $ 15.3 $ 4.3 $ 8.5 $ 13.2 $ 9.0 $ 15.4 $ 0.7 $ 14.4 $ 4.0 $ 8.2 $ 18.5 $ 6.3 $ 17.6 $ 0.6 $ 14.0 $ 3.8 $ 8.1 $ 21.1 $ 4.9 $ 15.4 $ 0.3 $ 13.5 $ 3.6 $ 8.0 $ 18.5

Page 7: Arundel Partners - Real Options Valuations

$ 6.0 $ 8.8 $ 0.1 $ 12.9 $ 3.4 $ 7.8 $ 10.6 $ 0.8 $ 8.8 $ 0.1 $ 12.9 $ 3.4 $ 7.8 $ 10.6 $ 1.5 $ 6.6 $ 0.1 $ 12.9 $ 3.4 $ 7.8 $ 7.9 $ 0.8 $ 2.2 $ 0.1 $ 12.9 $ 3.4 $ 7.8 $ 2.6 $ 0.8 $ 11.0 $ - $ 12.7 $ 3.4 $ 7.8 $ 13.2 $ 0.8 $ 8.8 $ - $ 12.7 $ 3.4 $ 7.8 $ 10.6 $ 0.8 $ 3.3 $ - $ 12.7 $ 3.4 $ 7.8 $ 4.0 $ 39.1 $ 27.5 $ 31.9 $ 90.0 $ 32.5 $ 28.3 $ 33.0 $ 37.2 $ 49.4 $ 22.1 $ 66.3 $ 23.5 $ 22.0 $ 59.3 $ 16.3 $ 11.0 $ 10.8 $ 38.9 $ 13.2 $ 14.7 $ 13.2 $ 15.2 $ 14.3 $ 6.9 $ 29.4 $ 9.6 $ 12.2 $ 17.2 $ 15.0 $ 11.0 $ 6.6 $ 28.6 $ 9.3 $ 12.0 $ 13.2 $ 16.1 $ 14.3 $ 6.2 $ 27.7 $ 9.0 $ 11.8 $ 17.2 $ 7.1 $ 16.5 $ 1.8 $ 17.2 $ 5.0 $ 9.0 $ 19.8 $ 10.5 $ 14.3 $ 1.2 $ 15.5 $ 4.4 $ 8.5 $ 17.2 $ 6.5 $ 12.1 $ 0.8 $ 14.8 $ 4.1 $ 8.3 $ 14.5 $ 8.8 $ 13.2 $ 0.4 $ 13.7 $ 3.7 $ 8.0 $ 15.8 $ 1.4 $ 4.4 $ - $ 12.7 $ 3.4 $ 7.8 $ 5.3 $ 102.0 $ 54.9 $ 115.9 $ 293.7 $ 109.2 $ 82.3 $ 65.9 $ 43.3 $ 8.8 $ 38.9 $ 107.0 $ 38.9 $ 32.8 $ 10.6 $ 40.4 $ 60.4 $ 23.2 $ 68.9 $ 24.5 $ 22.7 $ 72.5 $ 17.7 $ 16.5 $ 11.1 $ 39.6 $ 13.5 $ 14.9 $ 19.8 $ 16.6 $ 22.0 $ 7.1 $ 29.9 $ 9.8 $ 12.4 $ 26.4 $ 14.3 $ 13.2 $ 5.4 $ 25.8 $ 8.3 $ 11.3 $ 15.8 $ 16.8 $ 20.9 $ 5.3 $ 25.4 $ 8.1 $ 11.2 $ 25.1 $ 11.3 $ 4.4 $ 4.6 $ 23.9 $ 7.6 $ 10.8 $ 5.3 $ 11.4 $ 15.4 $ 2.7 $ 19.3 $ 5.8 $ 9.5 $ 18.5 $ 10.1 $ 9.9 $ 2.5 $ 18.9 $ 5.7 $ 9.4 $ 11.9 $ 9.7 $ 11.0 $ 2.0 $ 17.4 $ 5.1 $ 9.0 $ 13.2 $ 9.8 $ 18.7 $ 1.7 $ 16.8 $ 4.9 $ 8.9 $ 22.4 $ 9.3 $ 19.8 $ 1.3 $ 15.7 $ 4.5 $ 8.6 $ 23.8 $ 5.1 $ 14.3 $ 0.8 $ 14.6 $ 4.1 $ 8.3 $ 17.2 $ 0.9 $ 5.5 $ 0.1 $ 13.1 $ 3.5 $ 7.9 $ 6.6 $ 0.8 $ 4.4 $ 0.1 $ 12.9 $ 3.4 $ 7.8 $ 5.3 $ 1.4 $ 14.3 $ - $ 12.7 $ 3.4 $ 7.8 $ 17.2 $ 0.8 $ 8.8 $ - $ 12.7 $ 3.4 $ 7.8 $ 10.6 $ 0.8 $ 5.5 $ - $ 12.7 $ 3.4 $ 7.8 $ 6.6 $ 58.6 $ 24.2 $ 56.0 $ 148.5 $ 54.5 $ 43.8 $ 29.0 $ 46.2 $ 22.0 $ 37.3 $ 103.1 $ 37.4 $ 31.8 $ 26.4 $ 38.6 $ 22.0 $ 30.9 $ 87.8 $ 31.6 $ 27.7 $ 26.4 $ 32.5 $ 19.8 $ 27.2 $ 78.6 $ 28.2 $ 25.3 $ 23.8 $ 22.2 $ 18.7 $ 14.3 $ 47.3 $ 18.4 $ 17.0 $ 22.4 $ 17.2 $ 18.7 $ 8.1 $ 32.3 $ 10.7 $ 13.0 $ 22.4 $ 17.8 $ 19.8 $ 6.9 $ 29.5 $ 9.7 $ 12.3 $ 23.8 $ 10.7 $ 20.9 $ 3.6 $ 21.5 $ 6.7 $ 10.1 $ 25.1 $ 13.2 $ 13.2 $ 3.6 $ 21.3 $ 6.6 $ 10.1 $ 15.8 $ 11.7 $ 12.1 $ 3.1 $ 20.2 $ 6.2 $ 9.8 $ 14.5 $ 10.4 $ 7.7 $ 3.1 $ 20.2 $ 6.2 $ 9.8 $ 9.2

$ 17.4 $ 17.7 $ 10.4 $ 37.9 $ 12.9 $ 14.5 $ 21.2

Page 8: Arundel Partners - Real Options Valuations

Arundel PartnersExhibit 7 (amounts in millions of nominal dollars)

AssumptionsSemiannual inflation rate 1.50%Semiannual discount rate 6%

First FilmNet Inflows Negative Cost One-year

Film Studio PV Yr 1 PV Yr 0 Return1 Parenthood MCA Universal $ 100.10 $ 21.53 3.65 2 Born on the Fourth of July MCA Universal $ 74.50 $ 19.38 2.84 3 Field of Dreams MCA Universal $ 59.10 $ 17.23 2.43 4 Uncle Buck MCA Universal $ 60.00 $ 16.15 2.72 5 Sea of Love MCA Universal $ 53.50 $ 26.92 0.99 6 Always MCA Universal $ 34.30 $ 33.38 0.03 7 K-9 MCA Universal $ 37.80 $ 12.92 1.93 8 The Burbs MCA Universal $ 32.20 $ 18.30 0.76 9 The Dream Team MCA Universal $ 28.40 $ 16.15 0.76 10 Do the Right Thing MCA Universal $ 30.00 $ 7.54 2.98 11 Dad MCA Universal $ 17.70 $ 20.46 (0.13)12 Shocker MCA Universal $ 14.30 $ 6.46 1.21 13 The Wizard MCA Universal $ 12.70 $ 8.61 0.47 14 Renegades MCA Universal $ 6.90 $ 12.92 (0.47)15 Harlem Nights Paramount $ 55.40 $ 32.30 0.72 16 Pet Sematary Paramount $ 52.60 $ 11.84 3.44 17 Black Rain Paramount $ 44.10 $ 32.30 0.37 18 Major League Paramount $ 40.30 $ 12.92 2.12 19 Cousins Paramount $ 21.10 $ 14.00 0.51 20 We're No Angels Paramount $ 2.10 $ 23.69 (0.91)21 Let it Ride Paramount $ 3.60 $ 19.38 (0.81)22 Shirley Valentine Paramount $ 8.90 $ 8.61 0.03 23 Fat Man and Little Boy Paramount $ 3.30 $ 20.46 (0.84)24 The Experts Paramount $ 8.20 $ 12.92 (0.37)25 Look Who's Talking Sony $ 142.30 $ 10.77 12.22 26 When Harry Met Sally Sony $ 83.30 $ 20.46 3.07 27 Steel Magnolias Sony $ 80.40 $ 23.69 2.39 28 See No Evil; Hear No Evil Sony $ 40.50 $ 19.38 1.09 29 The Bear Sony $ 22.40 $ 22.61 (0.01)30 Glory Sony $ 29.30 $ 22.61 0.30 31 Look Up Sony $ 14.10 $ 18.30 (0.23)32 Casualties of War Sony $ 11.40 $ 26.92 (0.58)33 Chances Are Sony $ 10.80 $ 19.38 (0.44)34 Family Business Sony $ 8.30 $ 19.38 (0.57)35 She's Out of Control Sony $ 10.50 $ 16.15 (0.35)36 Who's Harry Crumb? Sony $ 7.60 $ 15.07 (0.50)37 Adventures of Baron Munchause Sony $ 11.60 $ 55.89 (0.79)38 True Believer Sony $ 5.80 $ 15.07 (0.62)39 Troop Beverly Hills Sony $ 6.90 $ 19.38 (0.64)40 Tap Sony $ 6.70 $ 16.15 (0.59)41 Deepstar Six Sony $ 7.10 $ 8.61 (0.18)42 Johnny Handsome Sony $ 6.00 $ 21.53 (0.72)43 Music Box Sony $ 7.10 $ 19.38 (0.63)44 Immediate Family Sony $ 2.20 $ 15.07 (0.85)45 Listen to Me Sony $ 1.60 $ 16.15 (0.90)46 Physical Evidence Sony $ 3.60 $ 18.30 (0.80)47 Old Gringo Sony $ 6.00 $ 36.51 (0.84)

Page 9: Arundel Partners - Real Options Valuations

48 Loverboy Sony $ 2.00 $ 10.77 (0.81)49 Sing Sony $ 2.20 $ 15.07 (0.85)50 Winter People Sony $ 4.40 $ 17.23 (0.74)51 Welcome Home Sony $ 5.10 $ 15.07 (0.66)52 Adventures of Milo and Otis Sony $ 3.10 $ 8.61 (0.64)53 The Big Picture Sony $ 8.40 $ 8.61 (0.02)54 Slaves of New York Sony $ 7.80 $ 6.46 0.21 55 Eat a Bowl of Tea Sony $ 8.40 $ 2.15 2.90 56 To Kill a Priest Sony $ 8.20 $ 10.77 (0.24)57 Me and Him Sony $ 8.20 $ 8.61 (0.05)58 Bloodhounds of Broadway Sony $ 8.20 $ 3.23 1.54 59 The War of the Roses 20th Century Fox $ 80.80 $ 26.92 2.00 60 The Abyss 21st Century Fox $ 48.40 $ 48.35 0.00 61 Weekend at Bernie's 22nd Century Fox $ 30.20 $ 10.77 1.80 62 Say Anything 23rd Century Fox $ 17.50 $ 14.00 0.25 63 Skin Deep 24th Century Fox $ 16.60 $ 10.77 0.54 64 The Fabulous Baker Boys 25th Century Fox $ 14.10 $ 14.00 0.01 65 Millenium 26th Century Fox $ 8.20 $ 16.15 (0.49)66 Worth Winning 27th Century Fox $ 2.20 $ 14.00 (0.84)67 Gleaming the Cube 28th Century Fox $ 5.30 $ 11.84 (0.55)68 How I Got Into College 29th Century Fox $ 1.30 $ 12.92 (0.90)69 When the Whales Came 30th Century Fox $ 7.50 $ 4.31 0.74 70 Batman Warner Bros $ 311.50 $ 53.73 4.80 71 Driving Miss Daisy Warner Bros $ 101.20 $ 8.61 10.75 72 Tango & Cash Warner Bros $ 48.90 $ 59.12 (0.17)73 Lean on Me Warner Bros $ 29.80 $ 16.15 0.85 74 Her Alibi Warner Bros $ 16.80 $ 21.53 (0.22)75 Next of Kin Warner Bros $ 13.20 $ 12.92 0.02 76 Pink Cadillac Warner Bros $ 10.10 $ 20.46 (0.51)77 Young Einstein Warner Bros $ 13.60 $ 4.31 2.16 78 Dead-Bang Warner Bros $ 6.70 $ 15.07 (0.56)79 Dead Calm Warner Bros $ 7.60 $ 9.69 (0.22)80 Second Sight Warner Bros $ 5.80 $ 10.77 (0.46)81 See You in the Morning Warner Bros $ 5.10 $ 18.30 (0.72)82 In Country Warner Bros $ 3.80 $ 19.38 (0.80)83 Cookie Warner Bros $ 6.40 $ 14.00 (0.54)84 How to Get Ahead in Advertising Warner Bros $ 8.60 $ 5.38 0.60 85 Powwow Highway Warner Bros $ 8.40 $ 4.31 0.95 86 Bert Rigby, You're a Fool Warner Bros $ 7.50 $ 14.00 (0.46)87 Penn & Teller Get Killed Warner Bros $ 8.20 $ 8.61 (0.05)88 Checking Out Warner Bros $ 8.20 $ 5.38 0.52 89 Honey, I Shrunk the Kids Walt Disney $ 145.50 $ 23.69 5.14 90 Dead Poets Society Walt Disney $ 92.50 $ 21.53 3.30 91 The Little Mermaid Walt Disney $ 78.10 $ 21.53 2.63 92 Turner & Hooch Walt Disney $ 71.20 $ 19.38 2.67 93 Three Fugitives Walt Disney $ 36.30 $ 18.30 0.98 94 An Innocent Man Walt Disney $ 19.70 $ 18.30 0.08 95 Blaze Walt Disney $ 15.00 $ 19.38 (0.23)96 New York Stories Walt Disney $ 10.70 $ 20.46 (0.48)97 Gross Anatomy Walt Disney $ 7.80 $ 12.92 (0.40)98 Disorganized Crime Walt Disney $ 7.80 $ 11.84 (0.34)99 Cheetah Walt Disney $ 9.20 $ 7.54 0.22

All Film Average $ 27.68 $ 17.28 0.67 First Quartile $ 7.00 $ 10.77 (0.55)Median $ 10.50 $ 16.15 (0.02)Third Quartile $ 33.25 $ 20.46 0.99 Standard Deviation $ 41.62 $ 10.17 2.08

Page 10: Arundel Partners - Real Options Valuations

Interquartile range $ 26.25 $ 9.69 1.54

Page 11: Arundel Partners - Real Options Valuations

Arundel PartnersExhibit 7 (amounts in millions of nominal dollars)

Hypothetical SequelNet Inflows Negative Cost One-year

PV Yr 4 PV Yr 3 Return $ 76.80 $ 28.25 1.72 $ 56.80 $ 25.43 1.23 $ 47.30 $ 22.60 1.09 $ 47.00 $ 21.19 1.22 $ 44.40 $ 35.32 0.26 $ 31.40 $ 43.79 (0.28) $ 29.30 $ 16.95 0.73 $ 27.30 $ 24.02 0.14 $ 22.90 $ 21.19 0.08 $ 21.20 $ 9.89 1.14 $ 17.40 $ 26.84 (0.35) $ 12.40 $ 8.48 0.46 $ 8.70 $ 11.30 (0.23) $ 7.40 $ 16.95 (0.56) $ 51.10 $ 42.38 0.21 $ 41.10 $ 15.54 1.64 $ 39.00 $ 42.38 (0.08) $ 33.70 $ 16.95 0.99 $ 16.20 $ 18.37 (0.12) $ 8.70 $ 31.08 (0.72) $ 4.30 $ 25.43 (0.83) $ 4.30 $ 11.30 (0.62) $ 3.20 $ 26.84 (0.88) $ 1.10 $ 16.95 (0.94) $ 105.50 $ 14.13 6.47 $ 64.40 $ 26.84 1.40 $ 61.70 $ 31.08 0.99 $ 32.00 $ 25.43 0.26 $ 21.50 $ 29.67 (0.28) $ 20.80 $ 29.67 (0.30) $ 13.20 $ 24.02 (0.45) $ 12.30 $ 35.32 (0.65) $ 10.90 $ 25.43 (0.57) $ 10.20 $ 25.43 (0.60) $ 9.00 $ 21.19 (0.58) $ 7.90 $ 19.78 (0.60) $ 7.00 $ 73.33 (0.90) $ 6.70 $ 19.78 (0.66) $ 6.50 $ 25.43 (0.74) $ 6.40 $ 21.19 (0.70) $ 5.80 $ 11.30 (0.49) $ 5.00 $ 28.25 (0.82) $ 4.90 $ 25.43 (0.81) $ 4.30 $ 19.78 (0.78) $ 3.80 $ 21.19 (0.82) $ 3.40 $ 24.02 (0.86) $ 3.20 $ 47.90 (0.93)

Page 12: Arundel Partners - Real Options Valuations

$ 3.20 $ 14.13 (0.77) $ 2.40 $ 19.78 (0.88) $ 2.10 $ 22.60 (0.91) $ 1.70 $ 19.78 (0.91) $ 1.20 $ 11.30 (0.89) $ 1.20 $ 11.30 (0.89) $ 1.20 $ 8.48 (0.86) $ 1.20 $ 2.83 (0.58) $ 1.10 $ 14.13 (0.92) $ 1.10 $ 11.30 (0.90) $ 1.10 $ 4.24 (0.74) $ 63.80 $ 35.32 0.81 $ 44.60 $ 63.44 (0.30) $ 22.30 $ 14.13 0.58 $ 14.60 $ 18.37 (0.21) $ 14.00 $ 14.13 (0.01) $ 13.20 $ 18.37 (0.28) $ 4.70 $ 21.19 (0.78) $ 3.40 $ 18.37 (0.81) $ 2.70 $ 15.54 (0.83) $ 1.80 $ 16.95 (0.89) $ 1.10 $ 5.65 (0.81) $ 229.10 $ 70.51 2.25 $ 77.60 $ 11.30 5.87 $ 46.70 $ 77.57 (0.40) $ 22.90 $ 21.19 0.08 $ 15.00 $ 28.25 (0.47) $ 11.70 $ 16.95 (0.31) $ 11.40 $ 26.84 (0.58) $ 10.20 $ 5.65 0.81 $ 6.40 $ 19.78 (0.68) $ 6.10 $ 12.71 (0.52) $ 4.90 $ 14.13 (0.65) $ 4.40 $ 24.02 (0.82) $ 3.50 $ 25.43 (0.86) $ 2.60 $ 18.37 (0.86) $ 1.40 $ 7.06 (0.80) $ 1.20 $ 5.65 (0.79) $ 1.10 $ 18.37 (0.94) $ 1.10 $ 11.30 (0.90) $ 1.10 $ 7.06 (0.84) $ 111.20 $ 31.08 2.58 $ 74.40 $ 28.25 1.63 $ 62.00 $ 28.25 1.19 $ 54.60 $ 25.43 1.15 $ 29.10 $ 24.02 0.21 $ 17.00 $ 24.02 (0.29) $ 14.70 $ 25.43 (0.42) $ 8.20 $ 26.84 (0.69) $ 8.10 $ 16.95 (0.52) $ 7.10 $ 15.54 (0.54) $ 7.10 $ 9.89 (0.28)

$ 21.57 $ 22.67 (0.08) $ 3.45 $ 14.13 (0.81) $ 8.70 $ 21.19 (0.54) $ 28.20 $ 26.84 0.17 $ 31.70 $ 13.35 1.21

Page 13: Arundel Partners - Real Options Valuations

$ 24.75 $ 12.71 0.98