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Rovio Brothers a game manufacturer, has a new idea for an adventure game
Rovio Brothers a game manufacturer, has a new idea for an adventure game. It can market the game as a traditional board game, a DVD video game, and mobile-app based game. These are not mutually exclusive. However, there is a budget constraint of US $20,000 for the investment. Consider the following cash flows for the three projects for Rovio Brothers. Assume that the discount rate for Rovio brothers is 10%. It is a five-year project. The cash flows projected and investment amount at Year O is provided in Table. Which ways should Rovio Brothers market the game, considering a budget constraint of US $20,000 and why? DVD Year Board Game (S) video Mobile-app based game (S) game (S) 0 -10000 -10000 -20000 1 3000 5000 7000 2 4500 4000 8000 3 5000 3000 9000
Expert Solution
The question has mentioned that project is for 5 years but the cashflows are available only for 3 years, so asnwer has been given considering the cashflows for only 3 years.
Rovio brothers should market the game as Board Game and DVD video game because the NPV of that option is more than the option of Mobile App.
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