Calculation of Net Present Value of Edward the Magician-Multiple Choice Question
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Question
Edward the Magician has been offered $14 million to star in the lead role of the next three Magical movie series. If Edward takes this offer, he will have to forgo acting in other Magician movies that would pay him $5 million at the end of each of the next three years. Assume Edward’s personal cost of capital is 10% per year.
The NPV of Edward’s three-movie Magical movie series, offer is closest to:
A) 3.5 million
B) -1.6 million
C) 1.6 million
D) -1.0 million
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