The NPV of a New Video Game, Dexa 1, Is

question 10

Multiple Choice

The NPV of a new video game, Dexa 1, is −1.5 million after discounting all expected cash flows. However, if high demand in the market evolves, Dexa 2 is a possible follow-on opportunity in two years. In two years it will cost 10 million to start Dexa 2, which will produce 9 million of cash flow in year 2. N(d1) = 0.5785 and N(d2) = 0.1755. The annual interest rate is 11 percent and equals the risk-free rate. What is the Dexa 1 APV?

• A)$1.95 million
• B)$1.30 million
• C)$2.28 million
• D)$2.80 million

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Definitions:

Social Readjustment Rating Scale

A scale that measures the stress levels of different life events to predict their impact on an individual's health.

Inherently Stressful

Referring to situations, tasks, or conditions that are naturally predisposed to causing stress or tension.

Chronic Stressors

Threatening events that have a relatively long duration and no readily apparent time limit.

Ambient Stressors

Environmental factors or conditions that cause stress, such as noise, air pollution, or overcrowding.