**Investment Analysis of Movie Production****Scenario Overview:**You are considering making a movie. The movie is expected to cost $10.8 million upfront and will take a year to produce. After production, it's anticipated to earn $4.8 million in the year it is released and $1.9 million for the following four years. We need to determine the financial viability of this investment under two criteria: the payback period and the net present value (NPV) with a cost of capital at 10.2%.**Key Questions:**1. **Payback Period:** - *What is the payback period of this investment?* - The payback period is **5.16 years**. (This is rounded to one decimal place.)2. **Decision on Payback Period:** - *If you require a payback period of two years, will you make the movie?* - The answer is **No**. (This is selected from a drop-down menu, indicating that a two-year payback is not met.)3. **Net Present Value (NPV) Analysis:** - *Does the movie have a positive NPV if the cost of capital is 10.2%?* - If the cost of capital is 10.2%, the NPV is **$[ ] million**. (This is rounded to two decimal places and requires calculation.)**Conclusion:**Based on the payback period and NPV analysis, determine the financial feasibility of proceeding with the movie project in alignment with investment requirements and financial goals.

NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Answered: You are considering making a movie. The…

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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You are considering making a movie. The movie is expected to cost $10.2 million upfront and take a year to produce. After that, it is expected to make $4.8 millions in the year it is released and $1.8 millions 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 a positive NPV if the cost of capital is 10.1%? (Round all answers to one decimal place.) What is the payback period of this investment? The payback period is _____ years.
You are considering an investment manufacturing cocoa powder. This investment needs $185,000 today and expects to repay you $200,000 in a year from now. What is the IRR of this investment opportunity? Given the riskiness of the investment opportunity, your discount rate is 11%. What does the IRR rule say about whether you should invest? a. The IRR is 7.5%. The IRR rule says that you should not invest. b. The IRR is 8.11%. The IRR rule says that you should not invest. c. The IRR is 1.2%. The IRR rule says that you should not invest. d. The IRR is 16.8%. The IRR rule says that you should invest.
You are considering a safe investment opportunity that requires a $1,450 investment today, and will pay $950 two years from now and another $710 five years from now. a. What is the IRR of this investment? b. If you are choosing between this investment and putting your money in a safe bank account that pays an EAR of 5% per year for any horizon, can you make the decision by simply comparing this EAR with the IRR of the investment? Explain. a. What is the IRR of this investment? The IRR of this investment is %. (Round to two decimal places.)
An alternative investment product of gorilla glue is expected to generate cash flows of 81,000 every 3 years. Beginning 3 years from now. Your money right now is invested in a savings account earning 7.2% EAR if the investment product is the same exact risk as your savings account, what is the value today of the gorilla glue investment product?
You are considering making a movie. The movie is expected to cost $10.1 million up front and take a year to produce. After that, it is expected to make $4.3 million in the year it is released and $2.1 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 10.1%?
Caspian Sea Drinks is considering buying the J - Mix 2000. It will allow them to make and sell more product. The machine cost $1.92 million and create incremental cash flows of $582, 193.00 each year for the next five years. The cost of capital is 9.20 %. What is the profitability index for the J - Mix 2000?
You are considering making a movie. The movie is expected to cost $10.7 million up front and take a year to produce. After that, it is expected to make $4.6 million in the year it is released and $1.6 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 10.1%? www
You are considering opening a new plant. The plant will cost $95.1 million up front and will take one year to build. After that it is expected to produce profits of $31.8 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 7.6%. Should you make the investment? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. The NPV of the project will be $ million. (Round to one decimal place.)
Television is considering a project with an initial outlay of $X (you will have to determine this amount). It is expected that the project will produce a positive cash flow of $54,000 a year at the end of each year for the next 13 years. The appropriate discount rate for this project is 8 percent. If the project has an internal rate of return of 13 percent, what is the project's net present value? *** a. If the project has an internal rate of return of 13%, then the project's initial outlay is $ the nearest cent.) (Round to
son.2
You are considering an investment in a clothes distributer. The company needs $106,000 today and expects to repay you $124,000 in a year from now. What is the IRR of this investment opportunity? Given the riskiness of the investment opportunity, your cost of capital is 15%. What does the IRR rule say about whether you should invest? What is the IRR of this investment opportunity? The IRR of this investment opportunity is %. (Round to two decimal places.)
Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and sell more product. The machine cost $1.54 million and create incremental cash flows of $552,182.00 each year for the next five years. The cost of capital is 11.42%. What is the internal rate of return for the J-Mix 2000?

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