You are considering making a movie. The movie is expected to cost $ 10.2 million upfront and take a year to make. After that, it is expected to make $ 4.4 million in the first year it is released (end of year 2) and $ 2.1 million for the following four years (end of years 3 through 6). What is the payback period of this investment? If you require a payback period of two years, will you make the movie? Does the movie have positive NPV if the cost of capital is 10.2 % ?
You are considering making a movie. The movie is expected to cost $ 10.2 million upfront and take a year to make. After that, it is expected to make $ 4.4 million in the first year it is released (end of year 2) and $ 2.1 million for the following four years (end of years 3 through 6). What is the payback period of this investment? If you require a payback period of two years, will you make the movie? Does the movie have positive NPV if the cost of capital is 10.2 % ?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
You are considering making a movie. The movie is expected to cost
$ 10.2
million upfront and take a year to make. After that, it is expected to make
$ 4.4
million in the first year it is released (end of year 2) and
$ 2.1
million for the following four years (end of years 3 through 6). What is the payback period of this investment? If you require a payback period of two years, will you make the movie? Does the movie have positive NPV if the cost of capital is
10.2 %
?
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