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Question

You are considering making a movie. The movie is expected to cost $10.9 million upfront and take a year to make. After that, it is expected to make $4.2 million in the first year it is released (end of year 2) and $2.2 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 10.5%? According to the NPV rule, should you make this movie? What is the payback period of this investment?

The payback period is .(Round up to nearest integer.)

Based on the payback period requirement, would you make this movie?

What is the NPV of the movie if the cost of capital is 10.5%?