Use the Information for the Question(s) Below

question 62

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

---

Definitions:

Protocol

A set of formal rules or procedures for conducting activities or processes in a specified field or organization.

Market Culture

A form of organizational culture focused on external success, emphasizing competitiveness, achievement, and goal realization.

Market Culture

A type of organizational culture that prioritizes competitiveness, results, and achievements, focusing on the external environment rather than internal affairs.

Social Pressure

is the influence exerted by a group or society encouraging individuals to conform to norms or behaviors.