Question
You are considering making a movie. The movie is expected to cost $ 10.5$10.5 million up front and take a year to produce. After that,
You are considering making a movie. The movie is expected to cost
$ 10.5$10.5
million up front and take a year to produce. After that, it is expected to make
$ 4.1$4.1
million in the year it is released and
$ 1.7$1.7
million for the following four years. 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
10.4 %10.4%?
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