Question

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 $4.6 million in the year it is released and $1.9 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 10.9%​? What is the payback period of this​ investment?

The payback period is ____ years.  ​(Round to one decimal​ place.)

Answer 1

If you require a payback period of two years, you won't make the movie as the payback is 4.1 years.

The NPV is negative.

Calc: