Use the Information for the Question(s)below

question 56

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%.
-Without issuing 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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A situation where the demand for a product or resource exceeds the available supply.

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Processes and procedures implemented by an organization to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

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Constraints or restrictions that affect the scope, effectiveness, or validity of a process, analysis, or system.

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