Week 5 homework - Week 5 homework Finance 515 Keller School of Management October 4 2014 Problems(p 228 7-20 Payback and NPV Problems(p 228 You are

Week 5 homework - Week 5 homework Finance 515 Keller School...

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Week 5 homework Finance 515 Keller School of Management October 4, 2014 Problems (p. 228) ◦7-20 Payback and NPV Problems (p. 228) You are considering making a movie. The movie is expected to cost $10 million upfront and take a year to make. After that, it is expected to make $5 million when it is released inone year and $2 million per year for the following four years. What is the payback period of this investment? If you require a payback period of two years, will you make the movie? Does the movie have positive NPV if the cost of capital is 10%? (Berk 228)
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