A Manufacturer of Video Games Develops a New Game Over

question 24

Multiple Choice

A manufacturer of video games develops a new game over two years. This costs $830,000 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 $1.20 million per year for three years after that. What is the net present value (NPV) of this decision if the cost of capital is 10%?

• A) $950,349
• B) $1,045,384
• C) $1,520,559
• D) $1,805,663

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Definitions:

Variable Costs

Expenses that vary directly with the level of production or output, including costs such as raw materials and labor directly involved in manufacturing.

Price Changes

Alterations in the cost of goods or services over time, which can be influenced by factors such as supply and demand.

Agricultural Act

Legislation that regulates agricultural production, marketing, and subsidies.

Crop Insurance Programs

Government or private insurance schemes that compensate farmers for losses to their crops due to natural disasters or adverse weather conditions.