Question

You are considering making a movie. The movie is expected to cost $10.8 million upfront and take a year to make. After that, it is expected to make $4.5 million in the first year it is released (end of year 2) and $1.8 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 10.8%?

What is the payback period of this investment?

The payback period is ………… years.  (Round up to nearest integer.)

Based on the payback period requirement, would you make this movie? (yes – no) .

Does the movie have positive NPV if the cost of capital is 10.8%?

The NPV is $........... million. (Round to three decimal places.)

The movie has a (negative – positive)

Answer 1