Question: Question 15 10 points Save An You are a financial manager at a movie studio and you are considering a potential new film project. This

 Question 15 10 points Save An You are a financial manager

Question 15 10 points Save An You are a financial manager at a movie studio and you are considering a potential new film project. This movie is expected to cost $30 million up front (at t-0) and take one year to produce. After that, it is expected to generate positive cash flow of $21 million in the year it is released (at t-2). In year 3, the film is expected to generate $6.3 million as a result of DVD sales, with cash flows decreasing by 25 in perpetuity from then on. T = 4 0 1 2 3 5 Cash Flow (Smillion) 0.0 21 6.3 -30.0 4.7 3.5 If your movie studio makes investment decisions based solely on a required payback period of three years. would you make this movie? Yes, the film studio would accept this project as it allows the firm to recoup its initial investment within the required payback period a. No, the film studio would reject this project as it does not allow the firm to recoup its Init al investment within the required payback period b. The fim should accept this project as its cash flows fit the requirement that all negat ve cash flows are recelved before any positive cash flows. c. There is not enough information to answer this question. d

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