What is the payback period of this investment

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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 $80 million in the first year it is released and $6 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 years. (round to a full year)

b) If you require a payback period of two years, will you make the movie?

c) What is the NPV of this project?

d) According to the NPV rule, should you make the movie?

Reference no: EM131010095

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