Use the Information for the Question(s) Below

question 6

Multiple Choice

Use the information for the question(s) below.
An independent Canadian 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 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 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:

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A potent opioid analgesic medication used to manage significant pain when other treatments are insufficient.

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The length of time the effects of a drug or medication last after reaching its peak action.

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A timekeeping system that runs from 0000 to 2359, eliminating the need for AM and PM designations.