Project Evaluation Software games company, Avalanche Entertainment, is considering expanding its highly successful online game franchise to the board game or trading card environment. The company has decided that it will invest in one project but not both. Consider the following cash flows of the two mutually exclusive projects. Assume the discount rate for Avalanche Entertainment is 10 per cent.

Year Trading Cards (€)

Board Game

(€)

0 –200 –2,000 1 300 –2,200 2 300 900 3 100 500

(a) Based on the payback period, which project should be taken?

(b) Based on the NPV, which project should be taken?

(c) Based on the IRR, which project should be taken?

(d) Calculate the incremental IRR; which project should be taken?