Reference no: EM132972548

The CEO of Garneau Cinemas is considering making a movie and must decide between a comedy and a thriller-it ?doesn't have the production space to make both. The comedy is expected to cost ?$20 million up front? (at t? = 0). After? that, it is expected to make ?$13 million in the first year? (at t? = 1) and ?$4 million in each of the following two years? (at t? = 2 and t? = 3). In the fourth year? (at t? = 5), it is expected that the movie can be sold into syndication for ?$2 million with no further cash flows back to Garneau Cinemas. The thriller is expected to cost ?$35 million up front? (at t? = 0). After? that, it is expected to make ?$20 million in the first year? (at t? = 1) and ?$3 million in each of the following four years? (at t? = 2,? 3, 4, and? 5). In the sixth year? (at t? = 6), it is expected that the movie can be sold into syndication for ?$25 million with no further cash flows back to Garneau Cinemas. The cost of capital is 12?%, and Garneau usually requires projects to have a payback within four years. Determine each? project's payback and? NPV, and advise the CEO what she should do.