Mario Brothers, a game manufacturer, has a new idea for an adventure game. It ca

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.

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.)

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.)

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.)

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             %

Year Board Game DVD 0 –$ 1,200 –$ 2,700 1 690 1,750 2 950 1,570 3 210 800

Explanation / Answer

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.)

IRR

IRR using RR Excel Funtion

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 =27.37%

Year Board Game Cumlative cash Flow 0 -1,200 -1,200 1 690 -510 2 950 440 3 210 650 Paybackperiod =510/950+1 1.54 Year DVD Cumlative cash Flow 0 -2,700 -2,700 1 1,750 -950 2 1,570 620 3 800 1,420 Paybackperiod =950/1570+1                                   1.61

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