Question

Mario Brothers, a game manufacturer, has a new idea for an adventure game. It can either market the game as a traditional board game or as an interactive DVD, but not both. Consider the following cash flows of the two mutually exclusive projects. Assume the discount rate for both projects is 12 percent. Year DVD -$3,700 2,250 1,670 1,300 Board Game -$1,700 1 790 1,450 2 310 a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Payback period Board game years DVD years b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g. 32.16.) NPV Board game $ DVD c. What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) IRR Board game % % DVD d. What is the incremental IRR? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Incremental IRR

Answer 1

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- 2x F V projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Σ AutoSum : A Calibri 11 A A = = = V Wrap Text General Ea Copy Fill Paste B B- I A U SF Merge Merge & Center - Center $ -% % 4:0 .00 . Conditional Format Sort & Cell Find & Format Painter Insert Delete Format Formatting as Table Styles Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing FS266 - FOFPFQ FR FT FU 264 265 266 267 268 CUMULATIVE CFAT CUMULATIVE CFAT 269 YEAR BOARD GAME DVD BOARD GAME DVD 270 -1700 -3700 -1700 -3700 271 790 2250 -910 -1450 272 1450 1670 540 273 310 1300 850 1520 274 275 PAYBACK PERIOD FOR BOARD GAME 276 CASH FLOWS ARE UNEVEN 277 PAYBACK PERIOD 1 + CCFAT1/CFAT 2 = 1 + (910/1450) = 1.63 220 278 279 280 281 PAYBACK PERIOD FOR DVD CASH FLOWS ARE UNEVEN PAYBACK PERIOD 1 + CCFAT1/CFAT 2 = 1 + (1450/1670) = 1.87 282 283 284 H invest, EAA MI-np-ir_ REPLACEMENT S HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED REPLACEMENT BOND STEIN II I RRnpvbeta RATION PBP ARR ferences: KQ79 OPTION TO WAIT BOU 120% Rea D O 9 * 4 0 ENG 24-11-2019

projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) Data Review View Add-Ins File Home Insert Page Layout Formulas - 2x % Cut pt General Wrap Text Merge Merge & Center - Center SF $ % % , 4:0 .00 :.: Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Σ AutoSum : A Fill Sort & Clear Filter Editing Find & Select Alignment Number Cells FR FT FU F V Calibri 11 AA = = = E Copy Paste Format Painter BIU - D A Clipboard Font FR285 FOFPFO 283 284 285 286 287 YEAR 288 289 BOARD GAME (A) -1700 790 1450 310 DVD (B) -3700 2250 1670 1300 INCREMENTAL CF A-B 2000 -1460 -220 -990 290 291 292 293 RATE NPV 294 12% 381.94 [=NPV(FR293,FR289:FR291) +FR288] 12% 565.56 (=NPV(FS293,FS289:FS291) +FS288] C IRR 295 296 297 298 299 300 301 25.80% (=IRR(FR288:FR291)] 21.65% (=IRR(FS288:FS291)] INCREMENTAL IRR = 17.92% (=IRR(FU288:FU291)] 302 303 H invest, EAA MI-np-ir_ REPLACEMENT S HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED REPLACEMENT BOND I RRnpvbeta RATION PBP ARR ferences: KQ79 OPTION TO WAIT BOJ 120% STEIN II - Rea _ + D O 9 * 4 0 ENG 24-11-2019