Question
Universal Pictures recently purchased publishing rights for a comics series. It will cost 1.9 billion to develop a new franchise . Following the production of
Universal Pictures recently purchased publishing rights for a comics series. It will cost 1.9 billion to develop a new franchise . Following the production of the movie today, the cash flow to be generated from the movie will be $300 million, however next year the flow to be generated will change: there's 50% chance that movie will be able to generate $500 million and 50% chance that it will generate $200 million. Once the flow changes it will remain fixed forever. Discount rate on the project is 16%
(a)Provide calculations and decide either it is a good investment?
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