A Game manufacturer has a new idea for an Adventure game. It can lauch the game as a board game or an Interactive DVD, but not both. Consider the following cash flows of the two mutually exclusive projects. Assume the discount rate is 12%. Year Board Game DVD 0 -$950 -$2,200 1 $650 $1,500 2 $650 $1,250 3 $160 $150 a) What is the payback period for each project? in years? b) What is the NPV for each project? c) What is IRR for each project? in %? d) What is the incremental IRR? in %?

A Game manufacturer has a new idea for an Adventure game. It can lauch the game as a board game or an Interactive DVD, but not both. Consider the following cash flows of the two mutually exclusive projects. Assume the discount rate is 12%. Year Board Game DVD 0 -$950 -$2,200 1 $650 $1,500 2 $650 $1,250 3 $160 $150 a) What is the payback period for each project? in years? b) What is the NPV for each project? c) What is IRR for each project? in %? d) What is the incremental IRR? in %?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 3EA: If a copy center is considering the purchase of a new copy machine with an initial investment cost...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Year Board Game DVD

0 -$950 -$2,200

1 $650 $1,500

2 $650 $1,250

3 $160 $150

a) What is the payback period for each project? in years?

b) What is the NPV for each project?

c) What is IRR for each project? in %?

d) What is the incremental IRR? in %?

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