THIS QUESTION HAS THREE PARTS You are considering making a movie. The movie is expected to cost $20 million up front (at t=0) and take a year to produce After that, it is expected to generate positive cash flow of $14 million in the year it is released (at t=2). In year 3, the film is expected to generate $4 2 million as a result of DVD sales, with cash flows decreasing by 25% in perpetuity from then on. The timeline for this project is provided below 1 3 t= CF ($million) 0 -20 OA. $3 57 million OB. $0.59 million OC. $6.00 million OD. $1.49 million OE $26.28 million 0 2 14 4.2 4 3.15 Question A: If your movie studio makes investment decisions based solely on a required payback period of three years, would you make this movie? Question C: The profitability index of this film is closest to which of the following? *** OA. YES OB. NO OC. There is not enough information to answer this question. Question B. It your firm's cost of capital is 10%, what is the NPV of this opportunity? (Choose the most appropriate answer)

A. YES a. No C. There s not enovgh ritormation to wower fis weston A. 5357 milion a. 3059 milion C. 3000 milton D. $1.49 malion E. $2628 multion Qunstion C: The protataity inder of this firm is closest to which of the falowing