You are considering making a movie. The movie is expected to cost $10.2 million upfront...
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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 make. After that, it is expected to make $4.5 million in the first year it is released (end of year 2) and $1.8 million for the following four years (end of years 3 through 6) . What is the payback period of this investment? If you require a payback period of two years, will you make the movie? What is the NPV of the movie if the cost of capital is 10.7% ? According to the NPV rule, should you make this movie?
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