Panther Productions has just finished production of the most recent sequel in its Illinois Jones series. The film cost $22 million to produce. Most production personnel and actors were paid a fixed salary (included in the $22 million); however, the two major stars of the film, Chevy Harrison and Sean Connelly, as well as the director and producer, Stephen Lucas and George Spielberg, all received equity interests in the film. In addition, the distributor of the film, Parimont Productions, receives royalties in exchange for its investment of $6.5 million to promote the film. The actors each receive 4% of revenues, the director and producer each receive 8% of revenues, and Parimont receives 12% of the revenues. Panther receives 65% of the total box office receipts, and out of this amount it pays the royalties to the actors, director, producer, and promoter.
REQUIRED
1. What is the breakeven point on the film to Panther Productions expressed in terms of (a) revenues received by Panther and (b) total box office receipts?
2. Assume that, in its first year of release, the box office receipts for the movie total $320 million. What is the operating income to Panther from the movie in its first year?