Question

Mario brothers ltd 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 mario brothers. Assume that discount rate for mario brothers ltd is 10%

Which project should be chosen and what is the additional value mario brothers will create by choosing this project (the chosen one) over the other? The decision is to be taken at time t=0, The cah flow projections and innitial investment values are provided in the table

Year | Board Game (Cash Flow $) | DVD (Cash Flow $) |

0 | -900 | -1700 |

1 | 550 | 1300 |

2 | 450 | 900 |

3 | 100 | 300 |

Answer #1

NPV is calculated using NPV function in Excel.

The project which higher NPV should be chosen as it creates more value.

As the DVD project has a higher NPV, the DVD project should be chosen.

By choosing this project, additional value created = $451.01 - $47.03 = $403.98

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 9 percent.
Year
Board Game
DVD
0
–$
800
–$
1,900
1
610
1,350
2
500
950
3
130
400
a. What is the payback period for each project?...

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
Board Game
DVD
0
–$
1,450
–$
3,200
1
740
2,000
2
1,200
1,620
3
260
1,050
a. What is the payback period for each project?...

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 12 percent.
Year
Board Game
DVD
0
–$
950
–$
2,200
1
640
1,500
2
650
1,250
3
160
550
a.
What is the payback period for...

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 8 percent.
Year
Board Game
DVD
0
–$
1,500
–$
3,300
1
750
2,050
2
1,250
1,630
3
270
1,100
a.
What is the payback period for...

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