Get Rich
Investors
Your client, Get Rich
Investors, is in the retail securities brokerage business. Get Rich has
been
sued by Quincy Quickbuck, who alleges that his broker at Get Rich
misled him
into purchasing some risky investments, producing a loss for Quickbuck
of
$100,000. QuickbuckÕs lawyer has just made a final, take-it-or-leave-it
settlement offer of $25,000.
Having already
investigated and researched the case a bit and talked with your client,
you
conclude that the pertinent facts are as follows: litigation costs (for
each
side) would be about $30,000; Quickbuck has a 10% chance of success
(basically,
the case is frivolous, but you never know!); if successful, the award
would be
$100,000; and a loss in court would have a reputational cost to Get
Rich that
they value at $200,000.
Should they
accept this settlement
offer?
Jordy Michaels
Your client, the
Washington Unicorns, is in negotiation with Jordy Michaels for the
contract
that will cover the final season of his amazing basketball career.
Michaels was
reasonably healthy last season, but he has been recently troubled by
back
problems. At best, it seems, he can play another year. In the summer,
before
the official season begins, he will be in one of three situations
(which he is
in will be known to him but not to us):
1. He will be
reasonably healthy and able to play unimpeded. This is 50% likely. If
he is in
reasonably good health, continuing to play even for free would be
worthwhile
for him because he loves the attention of fans and the media.
2. He will be
moderately disabled, in which case it will be possible for him to play,
but he
would have to play in significant pain. This is 25% likely. Playing in
pain is
no fun, but he would be willing to do so if he gained at least $2
million
thereby.
3. He will be
permanently disabled and unable to play. This is 25% likely.
From the Unicorns
perspective, having Michaels play one more year is worth $20 million in
additional ticket and advertising profits.
Your client is
considering two contract offers:
FOR SURE: pay
Michaels $6 million, whether or not he plays.
CONTINGENT: pay
Michaels $10 million, but only if he plays.
Advise the Unicorns
on which contract they should offer Michaels.