You are considering making a movie. The movie is expected to cost $10.5 million up front and take a year to make. After that, it is expected to make $4.2 million in the year it is released and $2.1 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 10.1%? What is the payback period of this investment? The payback period is years. (Round to one decimal place.)

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
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You are considering making a movie. The movie is expected to cost $10.5 million up front and take a year to make. After that, it is expected to make $4.2 million in the year it is released and $2.1
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 10.1%?
What is the payback period of this investment?
The payback period is years. (Round to one decimal place.)
Transcribed Image Text:You are considering making a movie. The movie is expected to cost $10.5 million up front and take a year to make. After that, it is expected to make $4.2 million in the year it is released and $2.1 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 10.1%? What is the payback period of this investment? The payback period is years. (Round to one decimal place.)
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