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1a.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

1a.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 $4.4 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 10.1%? a.What is the payback period for this investment? The payback period is _______? years (Round up to nearest integer) b.Based on the payback period requirement, would you make this movie? YES or NO? c.What is the NPV of the movie if the cost of the capital is 10.1%? The NPV is $______?million (Round to three decimal places) d.The movie has a_____ Negative or Positive?

1b. Your firm spends $500,000 per year in regular maintenance of its equipment. Due to the economic downturn, the firm considers forgoing these maintenance expenses for the next 3 years. If it does so, it expects it will need to spend $2.2 million in year 4 replacing failed equipment. a. What is the IRR of the decision to forgo maintenance of the equipment? (Round to two decimal places.) b. Does the IRR rule work for this decision? c. For what costs of capital (COC) is forgoing maintenance a good decision?

1c.You have been offered a very long-term investment opportunity to increase your money one hundredfold. You can invest $500 today and expect to receive $50,000in 40 years. Your cost of capital for this (very risky) opportunity is17%.What does the IRR rule say about whether the investment should be undertaken? What about the NPV rule? Do they agree? a.The IRR of this investment opportunity is______ %. (Round two decimal places). b. The IRR rule says that you ________ should not invest or should invest? c. The NPV for the investment is $_______? (Round to the nearest cent). d. The NPV rule says that should not invest or should invest or should be indifferent?

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