Use the Information for the Question(s)below

question 41

Multiple Choice

Use the information for the question(s) below.
An independent film maker is considering producing a new movie.The initial cost for making this movie will be $20 million today.Once the movie is completed,in one year,the movie will be sold to a major studio for $25 million.Rather than paying for the $20 million investment entirely using its own cash,the film maker is considering raising additional funds by issuing a security that will pay investors $11 million in one year.Suppose the risk-free rate of interest is 10%.
-Assuming that the film maker issues the new security,the NPV for this project is closest to what amount? Should the film maker make the investment?

• A)$1.7 million;Yes
• B)$1.7 million;No
• C)$2.7 million;Yes
• D)$2.7 million;No

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Definitions:

18th Century

The century spanning the years 1701 to 1800, marked by significant historical events, including the Enlightenment, the American Revolution, and the beginnings of the Industrial Revolution.

19th Century

The period from January 1, 1801, to December 31, 1900, characterized by major social, economic, and technological changes.

Public Policy

Public policy consists of the system of laws, regulatory measures, courses of action, and funding priorities by a governmental entity or its representatives.

Government Outsourcing

The practice of government agencies contracting external organizations or companies to provide services or perform tasks that were previously done by public employees.