Problem 5-14 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 flows of the two mutually exclusive projects for Mario Brothers. Assume the discount rate for Mario Brothers is 19 percent.

Year

Board Game

CD-ROM

0

$

-510

$

-1,990

1

790

1,310

2

60

990

3

140

380

(a)

Calculate the payback period rule.

Board game

CR ROM

(b)

Which project should be chosen according to the payback period? CD Rom or board game?

Requirement 2:

(a)	Calculate the NPV for CD ROM and board game