Question

The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production. (Due to budgeting constraints, only one new picture can be undertaken at this time.) She feels that script 1 has a 70 percent chance of earning about $10,000,000 over the long run, but a 30 percent chance of losing $2,000,000. If this movie is successful, then a sequel will be produced, with an 80 percent chance of earning $5,000,000, but a 20 percent chance of losing $1,000,000. On the other hand, she feels that script 2 has a 60 percent chance of earning $12,000,000, but a 40 percent chance of losing $3,000,000. If successful, its sequel would have a 50 percent chance of earning $8,000,000, but a 50 percent chance of losing $4,000,000. Of course, in either case, if the original movie were a flop, then no sequel would be produced. What is the probability that script 1 will be a success, but its sequel will not?

Answer 1

Answer: $9,000,000

Step-by-step explanation:

Probability is simply defined as the chance or likelihood that an event is going to happen or occur.

The probability that script 1 will be a success, but its sequel will not is the success of script 1 added to the failure of its sequel.

The total payoff will simply be the sum of the individual layoffs of both the success and the failure. This will be:

= $10,000,000 + (- $1,000,000)

= $10,000,000 - $1,000,000

= $9,000,000