You are considering making a movie. The movie is expected to cost $10.1 million upfront and take a year to make. After that, it is expected to make $4.9 million in the first year it is released (end of year 2) and $1.8 million for the following four years (end of years 3 through 6). What is the payback period of this investment? If you require a payback period of two years, will you make the movie? What is the NPV of the movie if the cost of capital is 10.1%? According to the NPV rule, should you make this movie?
What is the payback period of this investment?
The payback period is years. (Round up to nearest integer.)