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 a positive NPV if the cost of capital is 10.1%​?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter14: Real Options
Section: Chapter Questions
Problem 4MC
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You are considering making a movie. The movie is expected to cost $10.2 million upfront and take a year to produce. After​ that, it is expected to make $4.8 millions in the year it is released and $1.8 millions 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 a positive NPV if the cost of capital is 10.1%​?

(Round all answers to one decimal​ place.)
What is the payback period of this​ investment?  
The payback period is _____ years.  

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