Larry the Cucumber has been offered $14 million to star in the lead role of the next three Larry Boy adventure movies. If Larry takes this offer, he will have to forgo acting in other Veggie movies that would pay him $5 million at the end of each of the next three years. Assume Larry's personal cost of capital is 10% per year.

Explain why the NPV decision rule might provide Larry with a different decision outcome than the IRR rule when evaluating Larry's three-movie deal offer.

Answer rating: 100% (QA)

0 1 2 3 NPV Cashflow 14000000 5000000 5000000 5000000 PV 10 10000 09091 08264 07513 Present valu... View the full answer