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:

Horizontal Tension

The stress exerted in a horizontal direction, often leading to stretching and thinning of the crust.

Confining Pressure

The pressure applied to a rock from all directions beneath the Earth's surface, often affecting the rock’s physical properties and deformation.

Strike-Slip Fault

A type of fault where rock strata are displaced primarily in a horizontal direction, parallel to the line of the fault.

Normal Fault

A type of fault where the hanging wall moves downward relative to the footwall, typically caused by extensional forces.