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You are considering making a movie. The movie is expected to cost $11 million upfront to make. The movie will produce cash flows of $4 million in one year, $2 million per year in each of years two, three, four and five, and then six years from today you can sell the syndication rights for $7 million in cash. Ignore taxes.
a. What is the payback period of the investment? Should you make the movie if the threshold payback period is 3 years?
b. If the appropriate discount rate is 9%, what is the NPV of the investment? Should you make the movie?
c. What is the IRR of the movie? d. What is the Profitability Index of the movie if the appropriate discount rate is 9%?
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Futuristic Coiffures (FC) needs to raise $85,000 to purchase a new machine. FC knows its component costs of capital are rd = 5%, rps = 7%, rs = 11%, and re = 13%. If FC expects to generate $27,000 in retained earnings this year, what marginal cost of..
Your company will generate $74,000 in annual revenue each year for the next seven years from a new information database. If the appropriate interest rate is 7.25 percent, what is the present value of the savings?
1.explain concept of financial intermediation. how does the possibility of financial intermediation increase the
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Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .092, E(RB) = .152, σA = .362, and σB = .622. a-1. Calculate the standard deviation of a portfolio that is composed of 37 percent A and 63 percent B when the correlati..
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Dan, Fran and Stan want to establish a bike sales and rental shop. Dan and Fran will be actively involved in managing the business operations, and Stan is investing most of the money. The 3 want to use a form of business organization that will give l..
Why are tax laws important to healthcare finance? What three major advantages do tax laws give to not – for – profit corporations?
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