Young screenwriter Carl Draper has just finished his first script. It has action, drama, and humour, and he thinks it will be a blockbuster. He takes the script to every movie studio in town and tries to sell it, but to no avail. Finally, ACME studios offers to buy the seript for either (a) $$\$ 12,000$$ or (b) 1 percent of the movie's profits. The studio will have to make two decisions. First is to decide whether the script is good or bad, and second is to decide whether the movie is good or bad. There is a 90 percent chance that the script is bad. If it is bad, the studio does nothing more and throws the script out. If the script is good, they will shoot the movie. After the movie is shot, the studio will review it, and there is a 70 percent chance that the movie is bad. If the movie is bad, the movie will not be promoted and will not turn a profit. If the movie is good, the studio will promote heavily; the average profit for this type of movie is $$\$ 20$$ million. Carl rejects the $$\$ 12,000$$ and says he wants the 1 percent of profits. Was this a good decision by Carl? Ignore the time value of money.