A Game manufacturer has a new  idea for an Adventure game. It can lauch the game as a board game or an Interactive DVD, but not both. Consider the following cash flows of the two mutually exclusive projects. Assume the discount rate is 12%.Year  Board Game    DVD0      -$950             -$2,2001       $650             $1,5002      $650             $1,2503      $160              $150a) What is the payback period for each project? in years?b) What is the NPV for each project? c) What is IRR for each project? in %?d) What is the incremental IRR? in %?

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Asked Mar 6, 2019
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A Game manufacturer has a new  idea for an Adventure game. It can lauch the game as a board game or an Interactive DVD, but not both. Consider the following cash flows of the two mutually exclusive projects. Assume the discount rate is 12%.

Year  Board Game    DVD

0      -$950             -$2,200

1       $650             $1,500

2      $650             $1,250

3      $160              $150

a) What is the payback period for each project? in years?

b) What is the NPV for each project? 

c) What is IRR for each project? in %?

d) What is the incremental IRR? in %?

 

 

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Expert Answer

Step 1

a)

Calculation of Payback Period for each project:

The payback period for each period project is calculated the cumulative cash flow method. For clear understanding an excel spreadsheet is used to calculate the payback period. The excel spreadsheet is shown below,

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Step 2

The excel spreadsheet workings for calculating payback period is shown below,

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Step 3

b)

Calculation of Net Present Value for each project:

For clear understanding an excel spreadsheet is used to calculate the net present value. The excel spreadsh...

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