Problem 5-10 Problems with IRR Suppose you are offered $9,500 today but must make the following payments: with IRR Suppose you are offered $9,500 today but must make the following payments: Year Cash Flows ($) 0 $ 9,500 1 −4,900 2 −3,600 3 −2,700 4 −2,000 d-1. What is the NPV of the off

Problem 5-10 Problems with IRR

Suppose you are offered $9,500 today but must make the following payments:

Year

Cash Flows ($)

0

$ 9,500

1

−4,900

2

−3,600

3

−2,700

4

−2,000

d-1.

What is the NPV of the offer if the appropriate discount rate is 12 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

NPV

$

d-2.

What is the NPV of the offer if the appropriate discount rate is 22 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

NPV

$

Please note I am trying to do these in Excel using the NPV

Formula NPV=(rate,cash flows)+ initial investment.

I have tried to calculate using -9500 and +9500 and the homework application tells me it’s wrong.

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 DVD, 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

DVD

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))

Payback period

Board game

DVD

I do not understand how to calculate a partial year payback result.

b.

What is the NPV for each project? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

NPV

Board game

$

DVD

$