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Q5. Ch5-14 14. Comparing Investment Criteria Wii Brothers, a game manufacturer, has a new idea for an adventure game. It can market the game
Q5. Ch5-14 14. Comparing Investment Criteria 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 for both projects is 10 percent. Year Board Game DVD 0 -$950 -$2,100 700 1,500 2 550 1,050 3 130 450 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?
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