Question
The CEO of Garneau Cinemas is considering making a movie and must decide between a comedy and a thriller long dashit doesn't have the production
The CEO of Garneau Cinemas is considering making a movie and must decide between a comedy and a
thriller long dashit
doesn't have the production space to make both. The comedy is expected to cost
$2020
million up front (at t = 0). After that, it is expected to make
$1111
million in the first year (at t = 1) and
$44
million in each of the following two years (at t = 2 and t = 3). In the fourth year (at t = 5), it is expected that the movie can be sold into syndication for
$22
million with no further cash flows back to Garneau Cinemas. The thriller is expected to cost
$4040
million up front (at t = 0). After that, it is expected to make
$2525
million in the first year (at t = 1) and
$33
million in each of the following four years (at t = 2, 3, 4, and 5). In the sixth year (at t = 6), it is expected that the movie can be sold into syndication for
$3030
million with no further cash flows back to Garneau Cinemas. The cost of capital is
1111%,
and Garneau usually requires projects to have a payback within four years. Determine each project's payback and NPV, and advise the CEO what she should do.
The payback for the comedy is
nothing
years, and the NPV of the comedy is
$nothing.
The payback for the thriller is
nothing
years, and the NPV of the thriller is
$nothing.
(Round to two decimal places as needed.)
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