Question

You are considering making a movie. The movie is expected to cost $10.3 million up front and take a year to produce. After that, it is expected to make $4.9 million in the year it is released and $1.7 million for the following four years.

a) What is the payback period for this investment?

b)If you require a payback period of two years, will you make the movie?

c)Does the movie have positive NPV if the cost of capital is 10.1 %?

Answer 1