A Manufacturer of Video Games Develops a New Game Over

question 22

Multiple Choice

A manufacturer of video games develops a new game over two years.This costs $850,000 per year with one payment made immediately and the other at the end of two years.When the game is released,it is expected to make $1.2 million per year for three years after that.What is the net present value (NPV) of this decision if the cost of capital is 9%?

• A)$991,220
• B)$1,071,432
• C)$1,564,559
• D)$1,841,093
• E)$1,234,870

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Definitions:

Unlimited Wants

The economic concept that humans have endless desires or wishes for goods and services, exceeding the finite resources available.

Limited Means

A situation or condition of having restricted financial resources or capabilities.

Capital Equipment

Long-lasting tools, machinery, or infrastructure used in the production of goods and services.

Fertile Land

Soil or land that is rich in nutrients, making it highly productive for agriculture.