What is the payback period of the investment


Problem

You are considering making a movie. The movie is expected to cost $10.4 million up front and take a year to make. After that, it is expected to make $4.9 million in the year it is released and $1.6 million 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 10.2%?

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Financial Accounting: What is the payback period of the investment
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