Homework Answers
Cost for developing game first incurred today = $830,000
while other Occurred at the end of year 2 for = $830,000
In 3 rd year, the game is relaesed and expected 3 cash flows of $1000,000 each year.
Calculating the NPV of the project:-
| Year | Cash Flows of Project ($ ) | PV Factor @8% | Present Value of Project ($) |
| 0 | (830,000.00) | 1.0000 | (830,000.00) |
| 2 | (830,000.00) | 0.8573 | (711,591.22) |
| 3 | 1,000,000.00 | 0.7938 | 793,832.24 |
| 4 | 1,000,000.00 | 0.7350 | 735,029.85 |
| 5 | 1,000,000.00 | 0.6806 | 680,583.20 |
| 5 | - | 0.6806 | - |
| 667,854.07 |
So, NPV is 4667,854.07
Option D
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A manufacturer of video games develops a new game over two years. This costs $830,000 per...
A manufacturer of video games develops a new game over two years. This costs $830,000 per...
A manufacturer of video games develops a new game over two years. This costs $830,000 per year with one payment made immediately and the other at the end of two years. When the game is released, it is expected to make $1.00 million per year for three years after that. What is the net present value (NPV) of this decision if the cost of capital is 8%? A. $1,268,923 B. $734,639 C. $1,068,567 D. $667,854
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