quiz3_w07b_ans - Note: In responding to "WHY/Explain" you...

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Note: In responding to "WHY/Explain" you should N AME ________________________________ give a meaningful explanation that would convince a skeptic. S CHOOL   OF  B USINESS  A DMINISTRATION F INANCE  350 Q UIZ  #3 P ROF . J ARRAD  H ARFORD 1. Under what circumstances is it OK to use IRR to make an investment decision? 2pts The cash flows have to be “well behaved,” meaning that there is only one sign change and it is easier if the first cash flow is negative followed by all positive. The decision must not affect the decision to take another project (you cannot use IRR to choose between projects). 2. New Line Cinema produced the Lord of the Rings Trilogy. They chose to film all three movies at the same time rather than one at a time. Although the total cost of filming all three at the same time was less than it would have cost to film each individually over several years, it was a risky strategy because it committed New Line to the full cost of the trilogy before they knew how the movies would be received. Assume the following: The cost of filming all 3 together is $300 million. The cost of filming them separately
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This note was uploaded on 04/07/2008 for the course FIN 350 taught by Professor Schonlau during the Winter '08 term at University of Washington.

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quiz3_w07b_ans - Note: In responding to "WHY/Explain" you...

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