You are considering making a movie. The movie is expected to cost $10.6 million upfront and take a year to make. After that, it is expected to make $4.3 million in the first year it is released (end of year 2) and $1.9 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 10.6%?
You are considering making a movie. The movie is expected to cost $10.6 million upfront and take a year to make. After that, it is expected to make $4.3 million in the first year it is released (end of year 2) and $1.9 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 10.6%?
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 $10.6 million upfront and take a year to make. After that, it is expected to make $4.3 million in the first year it is released (end of year 2) and $1.9 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 10.6%?
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