You are working on an estimated NPV for a movie project. It will cost $75 million to produce the first movie, and there is a 25% chance it is a success (producing a CF of $185 million in a year), and a 75% chance it is not successful (with a CF of $45 million). If the first movie is a success, then youll fund a big budget sequel. Itll cost $280 million, and has a 95% chance of generating a $950 million cash flow in 2 years, and a 5% chance of a $210 million cash flow. If the first movie is not a success, youre planning to do a low-budget sequel. In this case, the sequel will cost $35 million, and has a 80% chance of a $50 million cash flow, and a 20% chance of a $25 million cash flow. Your discount rate is 17% for this movie

Cost of first movie

Chance of success

CF of success

CF of failure

Discount Rate

Cost of big sequel

Chance of big sequel success

CF of big sequel success

CF of big sequel failure

Cost of small sequel

Chance of small sequel success

CF of small sequel success

CF of small sequel failure

tB=0 \begin{tabular}{c|c} C & D \\ & t=1 \end{tabular} Expected NPV