Anne is a bargain-minded shopper. normally, her favorite toothpaste costs the same at both of her local supermarkets, but the stores are having competing sales this week. at one store, there is a bonus offer: buy 2, get 1 free. at the other store, toothpaste is being sold at 40 percent off. anne instantly opts for the first offer. was that really the less-expensive choice? (hint: is "buy 2, get 1 free" the same as 50 percent off? )

Problem 9-5. net present value and taxes [lo 1, 2] penguin productions is evaluating a film project. the president of penguin estimates that the film will cost $20,000,000 to produce. in its first year, the film is expected to generate $16,500,000 in net revenue, after which the film will be released to video. video is expected to generate $10,000,000 in net revenue in its first year, $2,500,000 in its second year, and $1,000,000 in its third year. for tax purposes, amortization of the cost of the film will be $12,000,000 in year 1 and $8,000,000 in year 2. the company’s tax rate is 35 percent, and the company requires a 12 percent rate of return on its films. required what is the net present value of the film project? to simplify, assume that all outlays to produce the film occur at time 0. should the company produce the film?