Question
Will Brothers, a game manufacturer, has a new idea for an adventure game. It can market the game either as a traditional board game or
Will 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 that the discount rate for both projects is 10 percent. Year Board Game DVD 0 -$850 -$1,700 1 670 1,300 2 510 750 3 90 350 A) Based on the payback rule, which project should be chosen? B) Based on the net present value rule, which project should be chosen? C) Based on the internal rate of return rule, which project should be chosen? D) Based on the incremental internal rate of return (crossing point) rule, which project should be chosen?
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