FIN515_Homework_5_Roxanne RobinsonFIN515_Homework_5_Roxanne RobinsonProfessor Jerry Hartzog – Managerial Finance FIN515Roxanne Robinson
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 yearto make. After that, it is expected to make $5 million when it is released in one 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 ofcapital is 10%?