Question - You are considering making a movie. The movie is expected to cost $10.8 million upfront and take a year to make. After that, it is expected to make $4.3 million in the first year it is released (end of year 2) and $2.1 million for the following four years (end of years 3 through 6).
1- What is the payback period of this investment (years)?
2- If you require a payback period of two years, will you make the movie?
3- What is the NPV of the movie if 2- The cost of capital is 10.2%?
4- According to the NPV rule, should you make this movie? (Round up to nearest integer.)