Wii Brothers, a game manufacturer, has a new idea for an adventure game. It can
ID: 2781192 • Letter: W
Question
Wii Brothers, a game manufacturer, has a new idea for an adventure game. It can market the game either as a traditional board game or as an interactive DVD, but not both. Consider the following cash flows of the two mutually exclusive projects for the company. Assume the discount rate is 9 percent.
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.)
What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
What is the incremental IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Year Board Game DVD 0 –$ 800 –$ 1,900 1 610 1,350 2 500 950 3 130 400
Explanation / Answer
Payback period is the no. of years it takes to recover original investment.
NPV and IRR can be calculated on a calculator with the same functions.
Incremental IRR is the IRR of the difference in cash flows.
-800 -1900 -1100 610 1350 740 500 950 450 130 400 270 Payback 2.38 2.58 NPV $280.86 $447.00 IRR 32.62% 24.69% 18.99%Related Questions
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