Use the Information for the Question(s)below

question 48

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%.
-What is the NPV of this project if the film maker invests his own money and does not issue the new security? What is the NPV if the film maker issues the new security?

• A)$1.7 million;$1.7 million
• B)$1.7 million;$2.7 million
• C)$2.7 million;$1.7 million
• D)$2.7 million;$2.7 million

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Definitions:

Falsifying Information

The act of deliberately changing or fabricating data or records with the intent to deceive.

Productive Ways

Efficient and effective methods or strategies for achieving tasks, goals, or objectives.

Traditional Résumé

A formal document that a job applicant creates to itemize their qualifications for a position, typically listing education, experience, and skills.

Disclose

To reveal or make known information that was previously secret or unseen.