EF5052 Investments Case 3: Arundel partners, The Sequel Projet
EF5052 INVESTMENTS CASE 3 Arundel Partners: The Sequel Project
!"#P $ :
Ngai Chiu Wing Edward / 51042814 Ng Cheuk Yiu Hugo / 50649257 Lau Chau Nan, Ee!"n / 9700 4##0 $uo, Con%&an&ino / 5106 4265 'ang Hhong Yu, (ran)e%)a / 50191000 Ng $a &o, *rin / 9747 5858 +uen Hung $i&, 'hi!i / 5114 4#21 $uok, $enne&h / 5101 2428
'age 1 o- 7
EF5052 Investments Case 3: Arundel partners, The Sequel Projet
%h& do the 'r(nc('als o) Arundel Partners th(n* the& can +a*e +one& ,u&(n+o.(e sequel r(-hts/ %h& do the& ant to ,u& a 'ort)ol(o o) r(-hts (n ad.ance rather than ne-ot(at(n- )(l+ ,& )(l+ to ,u& the r(-hts/
.aking one" in &he oie indu%&r" i% an unredi)&a!e &a%k Wea&her a -i! wi!! e a))e&ed " &he genera! u!i) deend% on an" -a)&or% whi)h are di--i)u!& &o uan&i-" *% &he %&or" aea!ing3 Wi!! "ou -ind good a)&or% in &he )a%&ing3 Wi!! &he" under%&and ea)h o&her we!! wi&h dire)&or3 Wi!! arke&ing )a&)h &he u!i)% a&&en&ion3 he%e are u%& %oe o- &he ue%&ion% whi)h are un)er&ain u &i!! adan)e %&age% o- &he -i! rodu)&ion +o a%i)a!!", &he earning% o- a %&udio or a )oan" in &he oie indu%&r" wi!! !arge!" deend on i&% ai!i&" &o )hoo%e good %)ri&% and -ind &he righ& )rew &o haronie &he roe)& he re&urn% in one "ear )an ar" wide!" -ro -i!% giing a 1224 ro-i& &o 91 !o%%e% :iou%!", &he oie u%ine%% i% a er" un%&a!e one and wha& &he ;runde! ar&ner% were !ooking -or wa% &o %&ai!ie or a& !ea%& !ook -or %&a!e )hara)&eri%&i)% o- &hi% indu%&r", whi)h )ou!d e ea%ured wi&h ore a))ura)", and u%e i& &o o&ain %oe ro-i&% *- &he" )ou!dn& hae an" hin& o- a -i! wou!d e a hi& or no&, a& !ea%& &he" )ou!d -ind %oe redi)&ion% on how &he %eue!% o- oie% wou!d do he -a)& &ha& a!o%& a!! &he %eue!% -o!!ow a %u))e%%-u! -i! gae &he ;runde! ar&ner% a good oin& &o %&ar& wi&h he" )ou!d u%e in-ora&ion -ro &he -ir%& -i!% &o ake re%u!&% e%&ia&e% and )a!)u!a&e i- &he roe)& wa% wor&h" or no& he" roo%ed an innoa&ie idea in whi)h &he" wou!d u" &he righ&% o- aking &he%e %eue!% !ong &ie e-ore and een e-ore &he -ir%& -i!% were %&ar&ed he" &hough &hi% idea wou!d e grea&!" a))e&ed a% i& wou!d our )a%h in &he roe)& when i& wa% needed &he o%& a& ear!" %&age% o- &he oie Howeer, in order &o e!iina&e &he er" %ue)&ie -a)&% e<!ained ear!ier, and %in)e &he %&udio% wou!d een&ua!!" know ore aou& &he oie e<e)&a&ion% &han &he 'ar&ner%, &he" had &o nego&ia&e &he &er% in a -air and neu&ra! )ondi&ion ha& i% wh" &he" wan&ed &o aoid nego&ia&ing a ri)e er -i!= in%&ead &he" wou!d o--er a %ing!e ri)e -or &he who!e %eue! righ&% o- a %&udio during an e%&a!i%hed eriod o- &ie *&he -ir%& oie wa% a %u))e%% &he" wou!d e
inuirie% indi)a&ed no& !e%% &han ?+@ 2 i!!ion er oieA and &oo u)h wou!d no& ake &he u%ine%% ro-i&a!e
'age 2 o- 7
EF5052 Investments Case 3: Arundel partners, The Sequel Projet
Est(+ate the 'er1)(l+ .alue o) a 'ort)ol(o o) sequel r(-hts such as Arundel 'ro'oses to ,u& ou (ll tr& to d())erent +ethods to sol.e th(s 'ro,le+: so+e a''ro'r(ate 4CF a''roach and the 6lac*1Scholes a''roach ou +a& )(nd (t hel')ul to consult the A''end(7 h(ch e7'la(ns ho these )(-ures ere 're'ared 8Su''ose the a''ro'r(ate d(scount rate )or r(s*& cash )los (s 92 !(s*1)ree rate )or d(scount(n- sa)er cash )los (s at ;<
he )en&ra! %&one o- ;runde! ar&ner% roe)& i% &o e%&a!i%h a )orre)& ri)e -or &he who!e righ&% or&-o!io o do &hi% &wo e&hod% are re%en&edB aA )a!)u!a&ing &he h"o&he&i)a! %eue! er-oran)e% and o&aining a &o&a! a!ue o- ine%&en& u%ing an aroria&e ra&e -or di%)oun&ing &o re%en& &ie A u%ing a %i!e !a)k+)ho!e% o&ion% ri)ing ode! &o )a!)u!a&e &he ri)e o- &he righ&% )a!! he da&a whi)h we wi!! u%e &o )ou&e our )a!)u!a&ion% wa% roided " @aid @ai% and &he 'au! $agan ;%%o)ia&e% whi)h are re%en&ed in e
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+in)e &he o%i&ie ran)h o- &he &ree wou!d e &he on!" a&h rea!!" -o!!owed, we wi!! on!" &ake in&o a))oun& &ho%e -i!% whi)h hae a o%i&ie N'D (ro &he h"o&he&i)a! %eue! da&a we di%)oun& &he ne& in-!ow% a& "ear 4 and nega&ie )o%&% a& "ear # &o &he
'age # o- 7
EF5052 Investments Case 3: Arundel partners, The Sequel Projet
re%en& &ie a& "ear 0 he &a!e e!ow %how% &he 26 %eue! -i!% &ha& hae a o%i&ie N'D he &o&a! %u o- &he 26 %eue!% a))oun& -or 4901 .G whi)h diided " a!! &he 99 or&-o!io %eue!% gie% u% a ri)e o- 495.G er -i!
'age 4 o- 7
EF5052 Investments Case 3: Arundel partners, The Sequel Projet
Ca!)u!a&ing &he a!ue o- a righ& wi&h &he +. ode! hi% aroa)h )on%i%&% o- u%ing &he + o&ion ri)ing -oru!a &o ode! &he or&-o!io righ& o- &he %eue!% he aria!e% o- &he + ode! -or a %e& o- %&o)ha%&i) aria!e% are +o, $, r, , and %iga ;nd we a!" i& on &he or&-o!io in &he -o!!owing wa"B Var +o
4escr('t(on &he'Do-&heor&-o!ioa!ue
Value
$ r +iga
&heaeragenega&ie)o%&o-&he%e&o--i!% 226 &he ri%k -ree ra&e 6 a& 6 &he &ie in whi)h &he de)i%ion o- aking &he %eue! i% ade >Y #A # &he%&andarddeia&iono-&he%eue!%re&urn 121
1#71
?%ing &he da&a on E
Cuu!a&ie Do!a&i!i&"B %iga%r&>A I 121 he neare%& a!ue on &he &a!e wou!d e #55 &o eua&e C/+, u& we wi!! u%e a Ca!! o&ion )a!)u!a&or &o o&ain &he e
he )a!! ri)e u%ing &he + ode! )a!)u!a&or i% 506.G er -i! hi% ri)e i% &he -air ri)e )on%idering &he h"o&he&i)a! reenue% o- &he %eue!% 'ur)ha%ing an" righ& a& a !ower a!ue wou!d e ro-i&a!e and i)e er%a +uar" o- o&h e&hod% -or &he )a!)u!a&ion o- &he righ&% ri)e Method N'D di%)oun&ing +.ode!
Pr(ce 495 .G 506.G
;% "ou )an %ee on &he &a!e aoe, &he e%&ia&ed )a!! ri)e -or &he %eue!% righ&% i% ui&e %ii!ar hi% )on-ir% &ha& &he &heor" ehind e%&ia&ing o&ion% ri)ing i% )orre)&, u& wea&her i& i% &ru!" re!ia!e in &he rea! )a%e, wi!! on!" deend on &he adeua)" o- &he a%%u&ion%
'age 5 o- 7
EF5052 Investments Case 3: Arundel partners, The Sequel Projet
%hat are the 'r(+ar& ad.anta-es and d(sad.anta-es o) the a''roach &ou too* to .alu(n- the r(-hts/ %hat )urther ass(stance or data ould &ou requ(re to re)(ne &our est(+ate o) the sequel r(-hts> .alue/
:ur ana!"%i% o- &he roo%a! in)!ude% a ne& re%en& a!ue >N'D A )a!)u!a&ion oea)h oie rodu)&ion )oan" *& i% -e!& &ha& wai&ing &o ur)ha%e %eue! righ&% un&i! a-&er &he oie goe% in&o rodu)&ion wi!! ake i& ore di--i)u!& and )o%&!" &o ur)ha%e &he righ&% e!ow are adan &age% and di%ada n&age% o- &he aroa) h we &ook &o a!uing &he righ&%
;dan&age%B
+i!i)i&" e)au%e a!! aai!a! e da&a wa% u%ed, &here i% a grea&er %a!e in our ana!"%i% We a%%ue &ha& ore da&a oin&% wi!! !ead &o a ore a))ura&e )on)!u%ion We did no& e!iina&e an" ou&!ier% e)au%e we -e!& ou&!ier% are )hara)&eri%&i) o- &he indu%&r" he ana!"%i% i% a%ed uon hi%&ori)a! da&a ra&her &han -ari)a&ed a%%u&ion% We e!iee &ha& reaking ou& &he da&a " %&udio i% an adan&age e)au%e i& roide% dire)&ion
@i%adan&age%B
*& i% a%%ued &ha& hi%&ori)a! er-oran)e i% indi)a&ie o- -u&ure er-oran)e in &he %hor& &er a%ed on hi%&ori)a! da&a :ur a%%u&ion i% %uor&ed " E
(ur&her ;%%i%&an)e or @a&a
.ore hi%&ori)a! da&a wou!d e u%e-u! &o %uor& our a%%u&ion% .ore da&a on %u))e%% roai!i&ie% a" he! &o dire)& &he )our%e o- a)&ion We wou!d a!%o !ike &o hae in-ora&ion aou& &he wi!!ingne%% o- rodu)&ion )oanie% &o %e!! %eue! righ&% a& a renego&ia&ed ri)e
'age 6 o- 7
EF5052 Investments Case 3: Arundel partners, The Sequel Projet
%hat 'ro,le+s or d(sa-ree+ents ould &ou e7'ect Arundel and a +ajor stud(o to encounter (n the course o) a relat(onsh(' l(*e that descr(,ed (n the case/ %hat contractual ter+s and 'ro.(s(ons should Arundel (ns(st on/
he %&udio% -u&ure ehaior )an )hange e)au%e o- &he e;'A *& igh& ake di--eren& oie% he %&udio wan&% &o wi&hho!d oie% -ro ;' i- &he" know &he" wi!! e ig hi&%, i& wa% ir&ua!!" io%%i!e &o wri&e )on&ra)&% wi&h &he %&udio% &ha& )ou!d aoid &hi% oor&uni%&i) ehaior e)au%e o- &he )on-!i)&% o- in&ere%&, ;' roa!" needed %oe &"e o- )on&ra)&ua! ro&e)&ion here are an" de&ai!% o- a o&en&ia! )on&ra)& e&ween ;runde! and %&udio %&i!! need% &o e worked ou& (ir%& o- a!!, a %a&i%-a)&or" e&hod o- &he ri)e o- &he righ&% a"en& had &o e agreed :ne o- o%%i!e wa"% %hou!d e ;runde! &o ake a"en&% &o an e%)row a))oun& when a -ir%& -i! wen& in&o rodu)&ion +e)ond!", Cer&ain -i!% igh& hae &o e e<)!uded -ro &he arrangeen& i- &he %&udio i&%e!- did no& a!read" own &heir %eue! righ&% hird!", in order &o kee &he %&udio )oi&&ed &o &he %u))e%% o- o%%i!e %eue!%, i& roa!" wou!d e de%ira!e &o hae %&udio re&ain an in&ere%& in &he reenue% or &he ne& ro-i&% o- &he %eue!%, or &o hae righ&% -or %u%euen& %eue!, ie, &hird, -our&h and &o her -u&ure -i!%, reer& &o &he %&udio .oreoer, i& i% good -or ;runde! &o -i< an e<ira&ion da&e -or &he %eue! righ&%, erha% &hree "ear% -ro &he -ir%& -i!% re!ea%e, " whi)h &ie ;runde! wou!d hae &o de)!are i&% in&en&ion% or -or-ei& &he righ&% hi% arrangeen& a" he! ;runde! &o hae enough &ie &o de)ide whe&her &he" wi!! ake a %eue! ;nd ena!e i& &o ore ui)k!" wri&e o-- i&% ine%&en& in righ&% i& )ho%e no& &o e
'age 7 o- 7
