What is the payback period of this investment

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Reference no: EM131188384

You are considering making a movie. The movie is expected to cost $100 million upfront and takes a year to make. After that, it is expected to make $83 million in the first year it is released and $5 million for the following 20 years. Your cost of capital is 10%.

a) What is the payback period of this investment? (Hint: consider that you look upfront at this, that is from year=0. For solving this task it is necessary to consider carefully the timeline of the cash flows in years=0,1,2,3,....,21,22) The payback period IS.. (round to a full year)

b) If you require a payback period of two years, will you make the movie? (fill in "yes" or "no")

c) What is the NPV of this project? The NPV is $ (round to two decimals) d.) According to the NPV rule, should you make the movie? Answer: no (fill in "yes" or "no")

Reference no: EM131188384

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