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

---

Definitions:

Plain Language

Writing or speech that is clear, concise, and easily understood by the intended audience without unnecessary jargon or complexity.

Credibility

The quality of being trusted and believed in, often influenced by an entity's reputation, reliability, and expertise.

Formal Tone

A style of communication that is polite, well-structured, often adhering to conventional standards, used in professional or serious contexts.

Texting

The act of sending and receiving short messages, typically text-based, through mobile phones or other devices.