Question
The CEO of Garneau Cinemas is considering making a movie and must decide between a comedy and a thriller it doesn't have the production space
The CEO of Garneau Cinemas is considering making a movie and must decide between a comedy and a thriller it doesn't have the production space to make both. The comedy is expected to cost $20 million up front (at t = 0). After that, it is expected to make $13 million in the first year (at t = 1) and $4 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 $2 million with no further cash flows back to Garneau Cinemas. The thriller is expected to cost $40 million up front (at t = 0). After that, it is expected to make $25 million in the first year (at t = 1) and $3 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 $30 million with no further cash flows back to Garneau Cinemas. The cost of capital is 12%, 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.
fill the dashes and round to 2 decimal places.
The payback for the comedy is- years,
and the NPV of the comedy is $-.
The payback for the thriller is- years,
and the NPV of the thriller is $-
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