Could anyone please assist me with the questions in the attached Case Study.
Main Line vs. Basinger
1. In 1991, Main Line Pictures, Inc. sued actress Kim Basinger (and others) for breach of contract. Basinger had been in negotiation with Main Line to star in the film, "Boxing Helena" but had withdrawn from the project. The suit was heard in early 1993 in the Superior Court of the State of California, for the County of Los Angeles. You are to prepare a 3 to 5 page report with an analysis of plaintiff and defendants arguments as indicated below. Support your answers with financial computations where approprite.
1. Should Main Line's maximum and minimum lost profit amounts be revised downward for the following? Why?
a. The domestic distribution revenues of $3 million because the deal had not been finalized. No, the lost profits should not be revised downwards because the private negotiations for price of domestic distribution lacked market efficiency and did not reflect the eventual price of the film if it were released.
Moreover, if Basinger had acted in the movie, the domestic revenues would have been far higher than the $3 million. Even when Boxing Helena was made without Basinger, the domestic box office gross touched $2 million. This shows that if Basinger had acted in the movie the revenues would have been far higher than $3 million.
b. The $800,000 of foreign pre-sales because they were "probable" not actual.
No, the foreign pre-sales need not be scaled down because the foreign pre-sale markets were well organized. The buyers and sellers meet in well defined places. The information about the foreign pre-sales was very good.
That apart when Boxing Helena was actually released without Basinger, it grossed $5 million.
c. The loss of $2.1 million on the "Without Basinger" film.
This is not the loss on the film, but this amount is the amortization of the $5 million cost incurred on the film at the rate of 3/7. This is an ...
The solution answers the question below.