Silky Smooth Studio (SMS) is considering
investing in a movie project. The expected cash flows of the
project are given in the table below.
Year 0 1 2 3
Cash Flow -$100,000 $45,000
$45,000 $45,000
The required return of the project is 12 percent.
a. Using Net Present Value as the decision criterion,
should SMS invest in this movie? Explain carefully.
b. What is the discounted payback period of this
project?
I am suggesting SMS to invest in this movie, because SMS can earn profit with this investment. the calculation shown above.
The Discounted payback period is 2 year and 9 months.
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