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 -$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? (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 and 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 and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Board game years DVD years b. Board game DVD C. Board game % DVD % d. Incremental IRR %

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 -$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? (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 and 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 and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Board game years DVD years b. Board game DVD C. Board game % DVD % d. Incremental IRR %

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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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 –$ 1,000 –$ 2,300 1 650 1,550 2 700 1,350 3 170 600 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 and 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 and enter your answer as a percent rounded to 2…
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 a PC game, but not both. Consider the following cash flows of the two mutually exclusive projects. Assume the discount rate for both projects is 11 percent. Year Board Game PC 0 −$ 1,400 −$ 3,100 1 730 1,950 2 1,150 1,610 3 250 1,000 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 and 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 and enter your answer as a percent rounded to 2…
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. \table[[Year,Board Game,DVD],[0,-$1,300,-$2,900
Mario Brothers, a game manufacturer, has a new idea for an adventure game. It can market either the game as a traditional board game or as an interactive smartphone application, but not both. Consider the following cash flows of the two mutually exclusive projects for Mario Brothers. Assume the discount rate for the project is 10 percent. Year Board Game Smart-phone App 0 -$320,000 -$550,000 1 $240,000 $310,000 2 $130,000 $280,000 3 $75,000 $195,000 (a) Based on the Payback period rule, which project should you choose? (b) Based on the MPV, which project should you choose? (c) Based on the IRR, which project should you choose? (d) Based on the MIRR, which project should you choose? (e) What project would you recommend? Please help show how to answer the questions in Excel.
Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 7 percent discount rate for their production systems. Year System 1 System 2 0 -$12,800 -$42,700 1 12,800 32,300 2 12,800 32,300 3 12,800 32,300 What are the payback periods for production systems 1 and 2? (Round answers to 2 decimal places, e.g. 15.25.) Payback period of System 1 is years and Payback period of System 2 is years If the systems are mutually exclusive and the firm always chooses projects with the lowest payback period, in which system should the firm invest? The firm should invest in .system 1 system 2
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The Klingon Sausage Corporation is trying to choose between the following two projects: Year Cash Flow (Project I) Cash Flow (Project II) 0 -$363,000 -$165,000 1 184,800 99,600 2 184,800 99,600 3 184,800 99,600 The discount rate of both projects is 8%. Klingon’s manager believes the company has sufficient resources so that the two projects should not be treated as mutually exclusive. Which project should be taken based on the profitability index? A. Project I should be accepted and project II should be rejected. B. None of the projects should be accepted. C. Project I should be rejected and project II should be accepted. D. Both projects should be accepted.
Blossom Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 7 percent discount rate for their production systems. Year System 1 System 2 0 -$12,000 -$42,000 1 12,000 30,000 2 12,000 30,000 3 12,000 30,000 What are the payback periods for production systems 1 and 2? (Round answers to 2 decimal places, e.g. 15.25.) Payback period of System 1 is ________yrs & payback period of System 2 is ________yrs. If the systems are mutually exclusive & the firm always chooses projects with the lowest payback period, in which system should the firm invest?__________
Bey Bikes is considering a project that has the following cash flow and WACC data. What is the project's discounted payback? Initial investment (1,060.00) Cash flow-yr-1 610.00 Cash flow-yr-2 579.50 Cash flow-yr-3 549.00 Cash flow-yr-4 463.60 WACC a. 2.50 yrs b. 1.77 yrs 1.85 yrs d. 2.06 yrs C. 10.0%

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