Angela King is the Las Vegas promoter for professional fighter Randy Couture. King is promoting a new

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Angela King is the Las Vegas promoter for professional fighter Randy Couture. King is promoting a new Octagon world championship fight for Couture. The key area of uncertainty is the size of the cable pay-per-view TV market. King will pay Couture a fixed fee of $3.2 million and 25% of net cable payper view revenue. Every cable TV home receiving the event pays $45, of which King receives $27. King pays Couture $6.75, 25% of the $27.

King estimates the following probability distribution for homes purchasing the pay-per-view event:

DemandProbability

250,000....................0.10

300,000....................0.10

350,000....................0.20

400,000....................0.40

500,000....................0.10

1,000,000..................0.10

Required

1. What is the expected value of the payment King will make to Couture?

2. Assume the only uncertainty is over cable TV demand for the fight. King wants to know the breakeven point given her own fixed costs of $1.3 million and her own variable costs of $2.25 per home. (Also include King's payments to Couture in your answer.)

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
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Cost Accounting A Managerial Emphasis

ISBN: 978-0133138443

7th Canadian Edition

Authors: Srikant M. Datar, Madhav V. Rajan, Charles T. Horngren, Louis Beaubien, Chris Graham

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