Question
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
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 smartphone app, but not both. Consider the following cash flows of the two mutually exclusive projects for Mario Brothers. Assume the discount rate for Mario Brothers is 10 percent:
| Year | Board game | App |
| 0 | -$600 | -$1,900 |
| 1 | 700 | 1,400 |
| 2 | 150 | 900 |
| 3 | 100 | 400 |
a. Based on the payback 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?
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Financial Reporting Financial Statement Analysis And Valuation
Authors: James M Wahlen, Stephen P Baginskl, Mark T Bradshaw
10th Edition
0357722094, 978-0357722091
