(Present value tables are needed.)Family Fun Park is evaluating the purchase of a new game to be located on its Midway. Family Fun has narrowed their choices down to two: the Wacky Water Race game and the Whack-A-Mole game. Financial data about the two choices follows. What is the net present value of the Whack-A-Mole game?

Question

(Present value tables are needed.)Family Fun Park is evaluating the purchase of a new game to be located on its Midway. Family Fun has narrowed their choices down to two: the Wacky Water Race game and the Whack-A-Mole game. Financial data about the two choices follows.  What is the net present value of the Whack-A-Mole game?

Quizplus · Accepted Answer

In order to calculate the net present value (NPV) we need to find the present value of the cash inflows and outflows for each game using a discount rate of 12%. For the Wacky Water Race game, the NPV is ($56), meaning it has a negative value and is not profitable. However, the NPV for the Whack-A-Mole game is $1,367, indicating it is a profitable investment that should be pursued by Family Fun Park. Therefore, the best choice is Whack-A-Mole game.

(Present Value Tables Are Needed