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Mario Brothers, a game manufacturer, has a new idea for an adventure game. It can market the game 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 8 percent. Year Board Game CD-ROM 0 –$ 1,750 –$ 3,800 1 800 2,300 2 1,500 1,680 3 320 1,350
a. What is the payback period for each project? (Do not round intermediate calculations and round your final answers to 2 decimal places (e.g., 32.16).)
b. What is the NPV for each project?
c. What is the IRR for each project?
d. What is the incremental IRR?
Acme Medical Supply Company desires a target operating income amount of $100,000, with assumption inputs as follows: Compute the required revenue to achieve the target operating income and compute a contribution income statement to prove the totals.
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 1.0% + 0.45RM + eA RB = –1.0% + 1RM + eB σM = 16%; R-square A = 0.28; R-square B = 0.21 Break down the variance of each stock to the sys..
You are considering a purchase of two practically identical properties. Both properties have and are expected to generate the same net income. Property (1) has a cap rate of 9 while property (2) has a cap rate of 7. It is reasonable to assume that on..
You are a manager in a fictitious company of your choice. Your director has asked you to explain to the department staff the different types of budgets and techniques in order to provide an overall understanding. What are the various kinds of budgets..
A firm has a $100 million capital budge. It is considering two projects that each cost $100 million. Project A has an IRR of 20 percent, and NPV of $9 million, and will be terminated after 1 year at a profit of $20 million, resulting in an immediate ..
An individual has $20,000 invested in a stock with a beta of 0.3 and another $60,000 invested in a stock with a beta of 1.5. If these are the only two investments in her portfolio, what is her portfolio's beta? Round your answer to two decimal places..
Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $5.5 million in anticipation of using it as a warehouse and distribution site, but the comp..
Osborn Manufacturing uses a predetermined overhead rate of $19.30 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $252,830 of total manufacturing overhead for an estimated activity level of 13,100 direct labo..
Mortgage lenders base the mortgage interest rate they offer you on your credit rating. This makes it financially critical to maintain a credit score of 700 or higher. How much more interest would you pay on a $184,000 home if you put 20% down and fin..
Weekly demand for a popular model of HP printers at a Sam’s Club store is normally distributed, with a mean of 30 and standard deviation of 20. The store manager continuously monitors inventory and currently orders 300 printers each time the inventor..
Is it possible for the cash budget and the pro forma income statement to have different results?
On January 2d, 2014, Microsoft expects to ship 1,000,000 new X-Boxes from its US plant, which it will sell through EU dealers on 270-day terms at 250 Euro each. So Microsoft will receive payment from its dealers on September 28th, 2014.
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