Chapter 7

You are considering making a movie. The movie is expected to cost $ 10.3 million upfront and take a year to make. After that, it is expected to make $ 4.6 million in the first year it is released (end of year 2) and $ 2.2 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 10.7 %?

What is the payback period of this investment?

The payback period is ____years.