You are considering making a movie. The movie is expected to cost $10.5 million up front and take a year to produce. After that, it is expected to make $4.7 million in the year it is released and $2.2 million for the following four years. 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 10.4%?
You are considering making a movie. The movie is expected to cost $10.5 million up front and take a year to produce. After that, it is expected to make $4.7 million in the year it is released and $2.2 million for the following four years. 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 10.4%?
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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Transcribed Image Text:You are considering making a movie. The movie is expected to cost $10.5 million up front and take a year to
produce. After that, it is expected to make $4.7 million in the year it is released and $22 million for the following
four years. 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 10.4%?
What is the payback period of this investment?
The payback period is years. (Round to one decimal place.)
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