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:

Lumbar Enlargement

The thickening of the spinal cord in the low back region.

Motor Neurons

Specialized neurons that originate in the brain or spinal cord and terminate in muscles or glands, controlling their activities.

Cell Membrane

A biological membrane that separates the interior of all cells from the outside environment, controlling the passage of substances in and out of the cell.

Myelin

A fatty substance that forms a sheath around the axons of many neurons, facilitating fast and efficient electrical conduction of nerve impulses.