Question
You are considering making a movie. The movie is expected to cost $ 10.3 million upfront and take a year to make. After that, it
You are considering making a movie. The movie is expected to cost $ 10.3 million upfront and take a year to make. After that, it is expected to make $ 4.4 million in the first year it is released (end of year 2) and $ 1.9 million for the following four years (end of years 3 through 6) . What is the payback period of this investment? If you require a payback period of two years, will you make the movie? What is the NPV of the movie if the cost of capital is 10.1 % ? According to the NPV rule, should you make this movie? What is the payback period of this investment?
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