Comparing Investment Criteria Mario 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 CD-ROM, but not both. Consider the following cash fl ows of the two mutually exclusive projects for Mario Brothers. Assume the discount rate for Mario Brothers is 10 percent.

Year Cash Flow 0 $28,000,000 1 53,000,000 2 8,000,000 Year Board Game CD-ROM 0 $300 $1,500 1 400 1,100 2 100 800 3 100 400

a. Based on the payback period rule, which project should be chosen?

b. Based on the NPV, which project should be chosen?

c. Based on the IRR, which project should be chosen?

d. Based on the incremental IRR, which project should be chosen? LO.1